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CFR - Richemont - Audited results for the year ended 31 March 2009 and

Release Date: 14/05/2009 07:31
Code(s): CFR
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CFR - Richemont - Audited results for the year ended 31 March 2009 and proposed cash dividend Compagnie Financiere Richemont SA Depositary Receipts issued by Richemont Securities AG (Incorporated in Switzerland) ISIN: CH0045159024 Depositary Receipt Code: CFR ("Richemont") Audited results for the year ended 31 March 2009 and proposed cash dividend Richemont, the Swiss luxury goods group, announces its audited results for the year ended 31 March 2009. Financial highlights - Sales increased by 2 per cent to EURO 5 418 million. Good growth in the first six months was largely offset by lower sales in the second six months as a result of the worldwide economic slowdown. - Operating profit from the luxury goods businesses decreased by 12 per cent to EURO 982 million. - Net profit attributable to shareholders decreased by 31 per cent to EURO 1 075 million. The decrease in net profit reflects in part the restructuring effected during the year. Profit from continuing operations decreased by 23 per cent to EURO 751 million. - Cash generated by the Group`s luxury goods operations was EURO 819 million. Your company has a clean balance sheet and a net cash position at the year-end of EURO 822 million. - During the year, Richemont restructured its operations, effectively spinning out its non-luxury assets to a new investment vehicle, Reinet Investments S.C.A. (`Reinet`). - The Board proposes an ordinary dividend for the year of CHF 0.30 per share. For a former Richemont unitholder who continued to hold the Richemont, BAT and Reinet shares after completion of the restructuring, this means a small increase in dividend income over this very difficult year. Sales The overall 2 per cent sales increase reflected 10 per cent growth during the first six months of the year followed by a 5 per cent sales decline during the second six months. The decline was primarily the result of the worldwide economic slowdown, with the United States in particular reporting very weak trading during the important pre-Christmas period. Operating profit Operating profit for the year was EURO 982 million, including one-time charges amounting to EURO 79 million. Despite a significant profit increase in the first six months, weak trading in the second half-year significantly reduced gross profit. Swift measures taken to control operating costs in the second half-year resulted in the full year operating profit decrease being contained to 12 per cent. Favourable foreign exchange rate movements were offset by losses from the Group`s hedging programme, reported as financing charges. Net profit from continuing operations Net profit from continuing operations decreased by 23 percent, reflecting the reduction in operating profit from the luxury businesses and higher net financing charges compared to the prior year. Continuing operations exclude the equity accounted results from the Group`s former interest in British American Tobacco (`BAT`), reflecting the transfer of this interest to Reinet in October 2008. Net profit Group net profit attributable to shareholders, including continuing and discontinued operations, decreased by 31 per cent to EURO 1 075 million. Cash position The Group`s net cash position at 31 March 2009 was EURO 822 million. During the year, the cash flow before financing activities was EURO 556 million. This inflow was more than offset by dividends payments and the impact of the Group restructuring. Dividend The proposed dividend for the year is CHF 0.30 per share. The reduction compared to the prior year primarily reflects the Group restructuring and the separation from the investment in BAT. Richemont holds a portfolio of several of the most prestigious names in the luxury goods industry including Cartier, Van Cleef & Arpels, Piaget, Vacheron Constantin, Jaeger-LeCoultre, IWC, Alfred Dunhill and Montblanc. www.richemont.com Group results in EURO millions March 2009 March 2008 re-
presented C o n t i n u i n g o p e r a t i o n s
Sales 5 418 5 290 + 2 % Cost of sales (1 988) (1 875) . Gross profit 3 430 3 415 - Net operating expenses (2 448) (2 297) + 7 % Operating profit 982 1 118 - 12 % Net financial (costs) / income ( 101) 47 Share of post-tax results of 3 1 associates Profit before taxation 884 1 166 - 24 % Taxation ( 133) ( 194) Profit from continuing 751 972 - 23 % operations
D i s c o n t i n u e d o p e r a t i o n s Profit from discontinued 325 592 - 45 % operations, net of tax Net profit 1 076 1 564 - 31 % Analysed as follows: Net profit attributable to 1 075 1 565 shareholders Net profit attributable to 1 ( 1) minority interests 1 076 1 564 Earnings per share from EURO 1.337 EURO 1.710 - 22 % continuing operations - diluted basis Dividend per share CHF 0.30 EURO 0.78 n/a Operating profit in the year under review included restructuring charges in respect of continuing operations and other one-off charges amounting to EURO 79 million (2008: EURO 7 million) in total. The Group`s share of the results of British American Tobacco, reported within discontinued operations, also includes non-recurring items reported by that entity. Following the early adoption of the amendments to IAS 38 Intangible Assets as well as the reclassification of certain operations under `discontinued operations`, the results for the year ended 31 March 2008 shown in the table above have been re-presented. The impact of the re-presentation on sales is a reduction of EURO 12 million and an operating profit increase of EURO 10 million. The impact on net profit is a decrease of EURO 6 million. This document contains forward-looking statements as that term is defined in the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside the Group`s control. Richemont does not undertake to update, nor does it have any obligation to provide updates of or to revise, any forward-looking statements. Executive Chairman`s Commentary Overview The first half of the year under review saw record results by our Maisons(R). Then came the banking sector problems last September. Since October the impact of this crisis has spread globally, with the United States, Europe and Japan particularly hard hit. Our businesses have suffered accordingly. Management prepared contingency plans for such an eventuality and we have been working to implement them for quite a while. The Group has thus managed to optimise free cash flow. This has been achieved through the strict control of operating costs and working capital together with focused cutbacks in capital spending. Our goal was to enter the foreseen economic downturn with a clean balance sheet and proper liquidity. We are pleased to report that this has largely been achieved. Results Overall sales of EURO 5 418 million for the year reflected strong growth in the six months to September, followed by a sharp decline in trading from October until the end of the year. The overall growth was therefore limited to an increase of 2 per cent. After taking into account restructuring provisions, operating profit amounted to EURO 982 million. Whilst 12 per cent lower than the prior year, this still represents a strong performance in a most challenging trading environment. The Group`s cash flow from operations remained strong, with net cash on our balance sheet at 31 March 2009 of EURO 822 million. Group restructuring On 20 October 2008, the Group implemented the restructuring proposals that were announced in outline in November 2007 and in detail in August 2008. Consequently, former Richemont unitholders continue to hold the shares in Compagnie Financiere Richemont SA, which formerly made up part of the unit value, and received Reinet shares in exchange for the balance of the unit. Reinet shares are listed in Luxembourg and, for the benefit of former Richemont depository receipt holders in South Africa, a secondary listing of the new Reinet depository receipts was arranged there. The Richemont depository receipt programme continues, of course, in respect of the shares of Compagnie Financiere Richemont SA. Following the separation of the two entities, Reinet held the 19.5 per cent interest in British American Tobacco (`BAT`) together with some EURO 350 million in cash and a portfolio of small, non-luxury investments. On the date of separation, some 44 per cent of the former Richemont unit price was attributed to the Compagnie Financiere Richemont SA share and the remainder to Reinet. On 3 November 2008, 90 per cent of Reinet`s holding of BAT shares was distributed to shareholders by way of a partial capital reduction. Following the restructuring steps, a former holder of 1 000 Richemont `A` units would therefore hold 1 000 Richemont `A` shares, 611 BAT ordinary shares and 137 Reinet ordinary shares. Dividend The Richemont dividend proposal of CHF 0.30 per share follows an analysis of the Group`s cash flow requirements and takes into consideration the resizing as a consequence of the Group restructuring described above. BAT remains committed to its target of paying 65 per cent of long-term sustainable earnings to shareholders. In respect of its financial year ended 31 December 2008, BAT paid total dividends of GBP 1 661 million to its shareholders, the equivalent to GBP 0.837 per share. Reinet`s dividends will reflect that company`s profitability, investment needs and cash flows in the years ahead. Business development Whilst the year has been marked by the Group restructuring project, Richemont has also invested in new businesses. Richemont acquired the component manufacturing facilities of Geneva-based Roger Dubuis in 2007 and, in August 2008, bought 60 per cent of its commercial and brand-related operations. Known for its audacious designs, Roger Dubuis has a superb engineering and design capability, specifically linked to the coveted Geneva Poincon de Geneve hallmark. We were also pleased to see the first fruits of our joint venture collaboration with Polo Ralph Lauren at this year`s Salon International de la Haute Horlogerie in January. The collection of luxury watches marks the first step in what will be a long-term business collaboration, leveraging both companies` strengths. Although the second half of the year was very challenging, it is worth noting that certain Maisons, including Cartier, enjoyed a record year in terms of both sales and profits. Management Mr. Norbert Platt has indicated his intention to retire at the end of this year after 5 years as Richemont`s Chief Executive Officer. Over the period, Mr Platt has made an exceptional contribution to the Group in terms of its management structure and improvements to the core manufacturing and logistics infrastructure. He has worked with the CEOs of individual Maisons(R) to help them in realising the full potential of their individual enterprises. During his tenure, the Group`s sales grew to record levels and operating profit exceeded EURO 1 billion in the 2008 financial year, before the current economic downturn. I would like to thank Norbert personally for his commitment to Richemont over the last 5 years and to congratulate him on his achievements during that period. He has instilled a strong discipline across the entire organisation but has equally ensured that the entrepreneurial spirit has flourished. His accomplishments during his tenure have been many and he will leave behind a legacy of successful businesses and a very efficient central and regional organisation. It has been a pleasure to work with Norbert over the decades, both in his current role and during his time as CEO of Montblanc, where he also achieved so much. Outlook Sales in the first month of our new financial year were 19 per cent lower than April 2008. This significant reduction was not unexpected, given the very strong comparative figure and the state of the world economy today compared to a year ago. There are currently very few encouraging signs in the global economic picture. The US market is very weak and conditions in Japan have been poor for some time. Most European markets are unsettled and trading remains hesitant. The Asia-Pacific region and the Middle East continue to report some positive sales trends. Given these conditions, we cannot predict when an overall improvement in trading will come about. Compared to the record level of sales reported in the first six months of last year, trading conditions through to September 2009 will be very challenging indeed. Having prepared for the downturn, we now have the resources available to support our Maisons(R), our colleagues and our clients during the tough times ahead. We intend doing exactly that, and will emerge from these economic headwinds in a much stronger competitive position - however long it may take. Johann Rupert Executive Chairman Compagnie Financiere Richemont SA Geneva, 14 May 2009 14 May 2009 Business Review in EURO millions March 2009 March 2008 re-presented Sales 5 418 5 290 + 2 % Cost of sales (1 988) (1 875) Gross profit 3 430 3 415 - Net operating expenses (2 448) (2 297) + 7 % Selling and (1 235) (1 177) + 5 % distribution expenses Communication expenses ( 644) ( 608) + 6 % Administration expenses ( 542) ( 522) + 4 % Other operating ( 27) 10 n/a (expense)/income Operating profit 982 1 118 - 12 % Sales increased by 2 per cent to EURO 5 418 million. The overall 2 per cent sales increase reflected 10 per cent growth during the first six months of the year, offset by a 5 per cent sales decline during the second six months. The decline was primarily the result of the worldwide economic crisis, with certain markets reporting very weak trading during the important pre-Christmas period. This was against the backdrop of strong trading in the second half of the prior year. Sales growth by region was mixed, with double-digit sales growth in the Asia-Pacific region and either low single-digit growth or lower absolute sales reported in other regions. At constant exchange rates, the annual sales increase would have been 2 per cent. The gross margin percentage decreased by 1.3 percentage points to 63.3 per cent. The decrease largely reflects the strengthening of the Swiss franc against the euro and higher raw material costs, which more than offset price increases. The economic slowdown in the second half-year also contributed to the lower gross margin as manufacturing fixed costs were spread across lower levels of production. The growth in sales revenue was offset by the lower gross margin percentage such that gross profit, at EURO 3 430 million, was in line with the prior year. Net operating expenses increased by 7 per cent. The increase in selling and distribution expenses largely reflected new boutique locations, primarily in the Far East. The 6 per cent increase in communication costs reflects the one- off impact of the costs associated with holding two Geneva watch fairs (Salons International de la Haute Horlogerie) during the year under review, as well as the impact of revisions to an accounting standard regarding the treatment of advertising material. Consequently, as a percentage of sales, communication costs were higher than the prior year at 11.9 per cent. Administration expenses increased by 4 per cent overall. Other operating expenses included restructuring charges linked to the closure of certain marginal boutiques, cutting excess capacity in specific manufacturing facilities and other cost control measures. Operating profit for the year amounted to EURO 982 million, including the once- off items referred to above which amounted to EURO 79 million. Despite a significant profit increase in the first six months, weak trading in the second half of the year significantly reduced the level of gross profit. Swift measures taken to control operating costs in the second half-year resulted in the full year profit decrease being contained at 12 per cent. Analysis of sales and operating results by business area Sales and operating results of the Group`s main areas of activity were as follows: in EURO millions March March 2008 2009 re-
presented Sales Jewellery Maisons 2 762 2 657 + 4 % Specialist watchmakers 1 437 1 378 + 4 % Writing instrument Maison 587 625 - 6 % Leather and accessories 294 309 - 5 % Maisons Other businesses 338 321 + 5 % Total sales 5 418 5 290 + 2 % Operating results Jewellery Maisons 777 765 + 2 % Specialist watchmakers 287 374 - 23 % Writing instrument Maison 69 126 - 45 % Leather and accessories ( 10) ( 5) - 100 % Maisons Other businesses ( 1) 16 n/a 1 122 1 276 - 12 % Corporate costs ( 140) ( 158) - 11 % Central support services ( 139) ( 146) - 5 % Other operating expense, net ( 1) ( 12) - 92 % Operating profit 982 1 118 - 12 % In the table above, those Maisons which are principally engaged in a specific business area have been grouped together. By way of example, those businesses which have a heritage as producers of high jewellery and jewellery watches - Cartier and Van Cleef & Arpels - are grouped together as `Jewellery Maisons`. Their entire product ranges, including watches, writing instruments and leather goods, are reflected in the sales and operating result for that business area. Jewellery Maisons In a difficult trading environment, Cartier reported another record year in sales and profitability, with the pattern of sales around the world reflecting those of the Group as a whole. High jewellery sales, which are made exclusively through Cartier`s own boutique network of 172 stores, were particularly strong together with sales of high jewellery watches and Ballon bleu. Sales of other products were broadly in line with the prior year. Van Cleef & Arpels reported good sales growth, albeit from a significantly lower base. Operating profit for the business area as a whole increased by 2 per cent to EURO 777 million. Operating margin for the business area was 1 percentage point lower at 28 per cent. Specialist Watchmakers The Group`s nine specialist watchmakers, which now include Roger Dubuis and Ralph Lauren Watches, enjoyed modest growth for the year as a whole. Sales at IWC, Vacheron Constantin and Jaeger Le-Coultre were particularly strong and all of the long-held Maisons were profitable. During the year under review a second SIHH took place in Geneva and the Group incurred specific charges relating to the acquisition of the Roger Dubuis business. These additional costs partly account for the reduction in profitability for the business area as a whole. Despite the decrease in profit and the increase in sales, the operating profit margin for the year was contained at 20 per cent. In January 2009, the joint venture with Polo Ralph Lauren premiered its product range; this had no impact on sales during the year. Writing Instrument Maison Montblanc`s sales decreased by 6 per cent. The growth from sales through the Maisons own boutique network was offset by a fall in sales to wholesale partners, in large part due to a strategy of cutting back the number of points of sale. An increasing proportion of sales were generated by leather goods, watches and jewellery lines and, for the first time in more than 100 years, writing instruments accounted for less than half of the Maison`s sales. The additional costs of Montblanc`s own boutique network, which were not fully compensated by retail sales growth, contributed to the 45 per cent drop in operating profit. Accordingly, the operating margin decreased from 20 per cent to 12 per cent. The Montegrappa writing instrument business has been classified as a discontinued operation. We are actively engaged in negotiations to sell this business. Leather and Accessories Maisons Despite growth in the Asia-Pacific region, Alfred Dunhill reported a modest decrease in sales and was close to breaking even for the second year in succession. Lancel`s sales were 8 per cent lower than the prior year, reflecting lower unit volumes as it continues to move to products with higher price points and improved margins. Largely as a consequence of the lower sales, Lancel`s operating losses increased from EURO 4 million in the prior year to EURO 8 million in the year under review. Other businesses Chloe`s sales were well below the level of the prior year, leading to a lower level of profit. Sales of this business area as a whole included the impact of acquisitions made during the previous financial year. These included watch component manufacturing businesses and the Alaia Maison. Overall operating profit in this business area fell significantly, largely due to the lower profitability at Chloe and losses from watch component manufacturing activities, including restructuring charges. Corporate costs Corporate expenses principally represent the costs of central management, marketing support and other central functions, as well as other expenses and income which are not allocated to specific business areas, including foreign exchange hedging gains and losses. Costs in the year included fees relating to the Group restructuring. Operating profit After corporate costs, Group operating profit amounted to EURO 982 million, a 12 per cent decrease compared to the prior year. This reflects the low level of growth in sales and the lower gross margin percentage, albeit compensated by continuing cost control. The Group`s overall operating profit margin decreased from 21 per cent to 18 per cent. Sales by region Movement at:
Constant Actual March 2009 March 2008 exchange exchange in EURO re- rates rates millions presented Europe 2 363 2 284 + 5 % + 3 % Asia- 1 474 1 295 + 14 % + 14 % Pacific Americas 889 1 012 - 11 % - 12 % Japan 692 699 - 12 % - 1 % 5 418 5 290 + 2 % + 2 % Europe Sales in European markets increased by 3 per cent and accounted for 44 per cent of total turnover. The 3 per cent increase reflects a modest increase in established markets and double-digit sales growth in certain developing markets in the region, such as the Middle East. Asia-Pacific Sales growth in the region remained buoyant, although the rate of growth slowed during the course of the year. The strategic importance to the Group of the market in China was underlined by the continued expansion of the Group`s distribution network there. Sales in the region now represent 27 per cent of total sales. Americas The Americas region reported a 12 per cent sales decrease for the year: the modest sales decrease in the first six months was followed by a very significant slowdown during the second half of the year as the economic difficulties there impacted consumer confidence and purchasing power. Sales in the Americas represent 16 per cent of total sales. Japan The Japanese market remained challenging throughout the year, with sales in local currency terms 12 per cent lower than the prior year. The significant strengthening of the yen relative to the euro during the year largely offset this decrease in euro terms. Sales in Japan represent 13 per cent of total Group sales. Sales by distribution channel in EURO March 2009 March 2008 millions re-presented Retail 2 304 2 214 + 4 % Wholesale 3 114 3 076 + 1 % 5 418 5 290 + 2 % Retail Retail sales increased by 4 per cent to EURO 2 304 million. This growth reflected satisfactory trading at most established boutiques and the expansion of the network of Group-owned points of sale. Despite the closure of certain marginal boutiques, the total retail network increased by 58 to 1 370 boutiques at 31 March 2009. At the end of March 2009, the Group`s Maisons owned 797 boutiques. A further 573 points of sale were operated under franchise agreements; sales to franchise partners are treated as wholesale sales. Wholesale Wholesale sales increased by 1 per cent. The growth in the first six months was largely offset by the slowdown in the second six months, particularly among external watch retailers. Summary income statement and results from discontinued operations in EURO millions March 2009 March 2008 re-presented Operating profit - continuing 982 1 118 operations Net finance (costs) / income ( 101) 47 Profit before taxation 881 1 165 Taxation ( 133) ( 194) Share of post-tax results of 3 1 associated undertakings Profit from continuing operations 751 972 Profit from discontinued operations 325 592
Net profit 1 076 1 564 Attributable to shareholders 1 075 1 565 Attributable to minority interests 1 ( 1) Net profit 1 076 1 564 Net finance charges amounted to EURO 101 million. The charges primarily relate to realised and unrealised losses on foreign exchange derivatives used to hedge the Group`s net currency exposure. Financial income earned on deposits during the year was partly offset by structural borrowing costs. Compared to the prior year`s net income of EURO 47 million, the change primarily reflects the impact of exchange rates on derivative hedging instruments. The Group has a number of small investments which are classified as associated companies. The Group`s share of the results of these smaller investments amounted to a profit of EURO 3 million. The Group`s effective taxation rate was 15.7 per cent compared with 16.9 per cent last year. The effective taxation rate, which excludes the post-tax results from associates, in general reflects the level of corporate taxes in Switzerland. The lower effective taxation rate compared to the prior year reflects the decrease in profitability during the second six months of the year, particularly in the Americas, Germany and Japan. Discontinued operations Until 20 October 2008, the Group`s principal associated company was British American Tobacco plc (`BAT`). Following the separation of the Group`s former 19.5 per cent interest in BAT from that date, the Group`s interest in BAT has been treated as a discontinued operation. The Group`s share of the results of BAT decreased from EURO 609 million in the prior year to EURO 355 million in the year under review. The decrease primarily reflected the inclusion of six months and 20 days of attributable profit from BAT in the year under review but a full twelve months contribution in the prior year. In addition to the shorter accounting period, other changes impacting the result include the Group`s effective interest in the BAT result, which had increased due to the share buy-back programme carried out by BAT from 19.1 per cent at April 2007 to 19.5 per cent upon separation, the higher reported profit of BAT in sterling terms and foreign exchange translation effects. The Group`s share of results from BAT is reported net of taxation and minority interests. Further information in respect of British American Tobacco can be obtained from that company`s website: www.bat.com. Losses from other discontinued operations amounted to EURO 30 million (2008: EURO 17 million). Management is actively involved in the disposal of two small business units, including Montegrappa. Richemont`s total diluted earnings per share decreased from EURO 2.750 to EURO 1.916. From continuing operations, Richemont`s diluted earnings per share decreased by 22 per cent from EURO 1.710 to EURO 1.337. Cash flow in EURO millions March March 2009 2008 re- presented
Operating profit including losses from discontinued operations 951 1 101 Depreciation, amortisation and other items, net 229 134 Increase in working capital ( 361) ( 267) Cash generated from operations 819 968 Dividends received from associate 343 325 Net interest received 36 41 Taxation paid ( 179) ( 171) Net acquisitions of tangible fixed assets ( 293) ( 265) Net acquisitions of intangible assets ( 43) ( 30) Other investing activities, net ( 127) ( 102) Net cash inflow before financing activities 556 766 Dividends paid to shareholders ( 438) ( 701) Ordinary dividend ( 438) ( 364) Special dividend - ( 337) Increase/(decrease) in borrowings and other financing activities ( 59) 69 Distribution of discontinued operations, - net of cash disposed of ( 351) Net cash flow in respect of treasury units and shares ( 84) ( 37) Exchange rate effects ( 32) 51 Increase/(decrease) in cash and cash equivalents ( 408) 148 Cash and cash equivalents at the beginning of the year 1 771 1 623 Cash and cash equivalents at end of year (1) 1 363 1 771 Borrowings ( 541) ( 525) Net cash at the end of the year 822 1 246 The Group`s net cash position at 31 March 2009 was EURO 822 million compared with EURO 1 246 million twelve months earlier. The decrease in net cash largely reflects the distribution of EURO 351 million to Reinet as part of the Group restructuring. In other respects, cash generated from the luxury goods business during the year, after capital investments and taxation payments, was more than offset by the payment of ordinary dividends to unitholders in September 2008 and the acquisition of Roger Dubuis. Cash generated from operations totalled EURO 819 million for the year. The increase in working capital was largely due to higher inventories of finished goods and movements in year-end creditor balances. The increase in inventories, which followed the slowdown in the second six months, was limited by the measures taken to reduce manufacturing output. Dividends received from the Group`s associate, BAT, comprised the final dividend in respect of its financial year ended 31 December 2007 and the interim dividend for the 2008 financial year. The total cash received, amounting to EURO 343 million, was transferred to Reinet as part of the restructuring in October 2008 and is included in the figure reported above as a distribution of discontinued operations. Net acquisitions of tangible fixed assets amounted to EURO 293 million. This amount included investments in the Group`s network of boutiques as well as the further investment in the Maisons` manufacturing facilities. Other investing activities largely reflect the acquisition of a controlling interest in the Roger Dubuis business. In order to hedge executive stock option grants, the Group exercised options to purchase former Richemont units for a consideration of EURO 45 million and bought further shares and call options over Richemont `A` shares. The cost of these purchases was partly offset by proceeds from the exercise of stock options by executives and the disposal of excess BAT and Reinet shares following the Group`s restructuring. (1) Cash and cash equivalents are as per the consolidated cash flow statement appended to this report. Summarised balance sheet in EURO millions 31 March 31 March 2008 2009 re-presented Non-current assets Fixed assets 1 534 1 207 Investment in associated 14 3 008 undertakings Other non-current assets 628 499 2 176 4 714
Net current assets 2 028 1 827 Net operating assets 4 204 6 541 Net cash 822 1 246 Cash and cash equivalents 1 363 1 771 Borrowings ( 541) ( 525) Other non-current liabilities ( 191) ( 168) 4 835 7 619 Equity Shareholders` equity 4 832 7 615 Minority interests 3 4 4 835 7 619 Following the Group restructuring, shareholders` equity was significantly reduced. The balance sheet at 31 March 2009 no longer reflects the carrying value of BAT shares (2008: EURO 2 998 million) or the cash and other smaller non-luxury investments attributed to Reinet on 20 October 2008. The carrying value of BAT was formerly included in associated undertakings. Other non-current assets include shares in BAT and Reinet held to hedge liabilities arising from modifications to the Group`s long-term stock option scheme. Following the restructuring, holders of vested options over the former Richemont `A` unit received instead options over the new Richemont `A` share and over shares in BAT and Reinet. This treatment of vested options was in line with the treatment received by external unitholders. Unvested options over the former Richemont `A` unit were replaced by options over the new Richemont `A` share only. In both cases, there was no change in the value of the related benefit. Richemont `A` shares held in treasury are reported as a deduction from shareholders` equity. Net current assets increased by EURO 201 million compared to March 2008. The value of net inventories increased by EURO 346 million to EURO 2 422 million. The inventory increase reflects an increase in finished goods as well as the acquisition of Roger Dubuis and exchange rate effects. As a result, the inventory rotation rate has slowed by 2.3 months to 18.7 months. The increase in inventories was partly offset by an increase in current liabilities, largely relating to derivative financial instruments to hedge foreign exchange rates and share option exposures. At 31 March 2009, net cash amounted to EURO 822 million. Cash balances were primarily denominated in euros, whereas borrowings were spread across the principal currencies of the countries in which the Group has significant operations, namely, yen, US dollars, Hong Kong dollars and Chinese renminbi. Borrowings reflect the financing of net operating assets in the countries concerned. Shareholders` equity amounted to EURO 4 832 million, net of the cost of repurchased treasury shares and related instruments. These treasury shares are held as a hedge against the exercise of executive share options. At 31 March 2009, the Group held 17.5 million treasury shares, representing 3.4 per cent of the total number of the `A` bearer shares in issue, plus the right to acquire a further 3 million shares. Proposed cash dividend The Board has proposed an ordinary dividend of CHF 0.30 per share. The dividend will be paid as Gross Net follows: dividend Withholding payable per share tax at 35% per share
Ordinary dividend Compagnie Financiere Richemont CHF 0.300 CHF 0.105 CHF 0.195 SA, Switzerland The dividend will be payable following the Annual General Meeting, which is scheduled to take place on Wednesday, 9 September 2009. The currently anticipated dividend payment dates are as follows: `A` share dividend: Monday, 14 September 2009. The dividend in respect of Richemont `A` shares is payable in Swiss francs. South African Depository Receipt dividend: Friday, 25 September 2009. The South African Depository Receipt dividend is payable in rand to residents of the South African Common Monetary Area (`CMA`) but may, dependent upon status, be payable in Swiss francs to non-CMA residents. Norbert Platt Richard Lepeu Group Chief Executive Officer Group Finance Director Compagnie Financiere Richemont SA Geneva, 14 May 2009 Sponsor RAND MERCHANT BANK (a division of FirstRand Bank Limited) Extracts from the audited consolidated financial statements at 31 March 2009 Consolidated balance sheet at 31 March 2009 2008 re- presented
Assets Notes EURO m EURO m Non-current assets Property, plant and equipment 1 148 975 Intangible assets 386 232 Investments in associated 2 14 3 008 undertakings Deferred income tax assets 305 257 Financial assets held at fair value 143 68 through profit or loss Other non-current assets 180 174 2 176 4 714
Current assets Inventories 8 2 422 2 076 Trade and other receivables 672 641 Derivative financial instruments 18 72 Prepayments and accrued income 80 108 Assets of disposal groups held for 11 - sale Cash at bank and on hand 2 032 2 094 5 235 4 991 Total assets 7 411 9 705 Equity and liabilities Equity Share capital 334 334 Participation reserve - 645 Treasury shares ( 195) ( 268) Hedge and share option reserves 90 176 Cumulative translation adjustment 124 ( 348) reserve Retained earnings 4 479 7 076 Total shareholders` equity 4 832 7 615 Minority interest 3 4 Total equity 4 835 7 619
Liabilities Non-current liabilities Borrowings 77 246 Deferred income tax liabilities 78 59 Retirement benefit obligations 39 42 Provisions 40 52 Other long-term liabilities 34 15 268 414
Current liabilities Trade and other payables 545 563 Current income tax liabilities 172 188 Borrowings 188 12 Derivative financial instruments 123 8 Provisions 117 95 Accruals and deferred income 218 216 Short-term loans 276 267 Bank overdrafts 669 323 2 308 1 672 Total liabilities 2 576 2 086 Total equity and liabilities 7 411 9 705 Consolidated income statement for the year ended 31 March 2009 2008 re- presented
Continuing operations Notes EURO m EURO m Sales 1 5 418 5 290 Cost of sales (1 988) (1 875) Gross profit 3 430 3 415 Selling and distribution (1 235) (1 177) expenses Communication expenses ( 644) ( 608) Administrative expenses ( 542) ( 522) Other operating (expense) / 3 ( 27) 10 income Operating profit 982 1 118
Finance costs 4 ( 228) ( 114) Finance income 4 127 161 Share of post-tax profit of 2 3 1 associated undertakings Profit before taxation 884 1 166 Taxation 5 ( 133) ( 194) Profit from continuing 751 972 operations Discontinued operations Profit from discontinued 6 325 592 operations (net of tax) Net profit 1 076 1 564 Attributable to: Shareholders 1 075 1 565 Minority interest 1 ( 1) 1 076 1 564 Earnings per share for profit and profit from discontinued operations attributable to shareholders during the year (expressed in EURO per share) Basic: - from continuing operations 7 1.340 1.734 - from discontinued operations 7 0.581 1.055 1.921 2.789 Diluted: - from continuing operations 7 1.337 1.710 - from discontinued operations 7 0.579 1.040 1.916 2.750 Consolidated statement of changes in equity for the year ended 31 March Equity attributable to shareholders
Cumulative translation Shareholders` Treasury Other adjustment capital shares reserves reserve
EURO m EURO m EURO m EURO m Balance at 31 March 979 ( 264) 151 113 2007 Adoption of IAS 38 - - - - (amendment) Balance at 1 April 979 ( 264) 151 113 2007 Currency translation - - - ( 461) adjustments Cash flow hedges: - net gains - - 31 - - recycle to income - - ( 13) - statement Net share of expense of associated undertakings - - - - recognised directly in equity Tax on items - - ( 24) - recognised directly in equity Net income / (expense) recognised directly in equity - - ( 6) ( 461) Net profit/(loss) - - - - Total recognised - - ( 6) ( 461) income/(expense) Net share of transactions of associated undertakings with - - - - their equity holders Net changes in - ( 4) - - treasury shares Employee share - - 31 - option scheme Dividends paid - - - - Balance at 31 March 979 ( 268) 176 ( 348) 2008 Currency translation - - - 57 adjustments Cash flow hedges: - net losses - - ( 41) - - recycle to income - - ( 12) - statement Net share of income of associated undertakings recognised directly in equity (discontinued - - - - operations) Tax on items - - ( 4) - recognised directly in equity Net income / (expense) recognised directly in equity - - ( 57) 57 Net profit - - - - Total recognised - - ( 57) 57 income/(expense) Net share of transactions of associated undertakings with their equity holders (discontinued - - - - operations) Net changes in - 73 - - treasury shares Employee share - - ( 29) - option scheme Dividends paid - - - - Minorities acquired - - - - in business combinations Partial liquidation ( 645) - - 415 of Group Balance at 31 March 334 ( 195) 90 124 2009 Consolidated statement of changes in equity for the year ended 31 March (continued) Minority Total Equity interest equity attributable to shareholders
Retained earnings Total
EURO m EURO m EURO m EURO m Balance at 31 March 2007 6 532 7 511 2 7 513 Adoption of IAS 38 ( 27) ( 27) - ( 27) (amendment) Balance at 1 April 2007 6 505 7 484 2 7 486 Currency translation - ( 461) 3 ( 458) adjustments Cash flow hedges: - net gains - 31 - 31 - recycle to income - ( 13) - ( 13) statement Net share of expense of associated undertakings recognised ( 87) ( 87) - ( 87) directly in equity Tax on items recognised - ( 24) - ( 24) directly in equity Net income / (expense) recognised directly in equity ( 87) ( 554) 3 ( 551) Net profit/(loss) 1 565 1 565 ( 1) 1 564 Total recognised 1 478 1 011 2 1 013 income/(expense) Net share of transactions of associated undertakings with their ( 173) ( 173) - ( 173) equity holders Net changes in treasury ( 33) ( 37) - ( 37) shares Employee share option - 31 - 31 scheme Dividends paid ( 701) ( 701) - ( 701) Balance at 31 March 2008 7 076 7 615 4 7 619 Currency translation - 57 - 57 adjustments Cash flow hedges: - net losses - ( 41) - ( 41) - recycle to income - ( 12) - ( 12) statement Net share of income of 0 associated undertakings recognised directly in equity (discontinued operations) 101 101 - 101 Tax on items recognised - ( 4) - ( 4) directly in equity Net income / (expense) recognised directly in equity 101 101 - 101 Net profit 1 075 1 075 1 1 076 Total recognised 1 176 1 176 1 1 177 income/(expense) Net share of transactions of associated undertakings with their equity holders (discontinued operations) ( 72) ( 72) - ( 72) Net changes in treasury ( 7) 66 - 66 shares Employee share option - ( 29) - ( 29) scheme Dividends paid ( 438) ( 438) - ( 438) Minorities acquired in - - ( 2) ( 2) business combinations Partial liquidation of (3 256) (3 486) - (3 486) Group Balance at 31 March 2009 4 479 4 832 3 4 835 Consolidated cash flow statement for the year ended 31 March 2009 2008 Note EURO m EURO m
Cash flows from operating activities Cash flow generated from operations 9 819 968 Interest received 73 82 Interest paid ( 37) ( 41) Dividends from associated undertaking 343 325 Taxation paid ( 179) ( 171) Net cash generated from operating 1 019 1 163 activities Cash flows from investing activities Acquisition of subsidiary undertakings and other businesses, net of cash acquired ( 126) ( 145) Acquisition of associated undertakings ( 3) ( 1) Acquisition of property, plant and ( 305) ( 271) equipment Proceeds from disposal of property, plant 12 6 and equipment Acquisition of intangible assets ( 44) ( 33) Proceeds from disposal of intangible 1 3 assets Acquisition of other non-current assets ( 59) ( 44) Proceeds from disposal of other non- 61 88 current assets Net cash used in investing activities ( 463) ( 397) Cash flows from financing activities Proceeds from borrowings 108 179 Repayment of borrowings ( 162) ( 107) Dividends paid ( 438) ( 701) Distribution of discontinued operations, ( 351) - net of cash disposed of Payment for treasury shares ( 98) ( 80) Proceeds from sale of treasury shares 14 43 Capital element of finance lease payments ( 5) ( 3) Net cash used in financing activities ( 932) ( 669) Net change in cash and cash equivalents ( 376) 97 Cash and cash equivalents at beginning of 1 771 1 623 year Exchange (losses)/gains on cash and cash ( 32) 51 equivalents Cash and cash equivalents at end of year 1 363 1 771 Notes to the consolidated financial statements 31 March 2009 General information On 20 October 2008, the de-twinning of the shares of Compagnie Financiere Richemont SA (`the Company`) and the participation certificates of Richemont SA was effected. The participation certificates of Richemont SA have been converted into ordinary shares and are traded in the name of Reinet Investments SCA (`Reinet`) on the Luxembourg stock exchange and are no longer directly related to the Company. Accounting policies and basis of preparation These consolidated financial statements of the Company are for the year ended 31 March 2009. They have been prepared in accordance with International Financial Reporting Standards (`IFRS`) and are consistent with the corresponding prior year period. The financial statements are presented in millions of euros; the euro represents the functional and presentational currency of the Group. Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. specialist watchmakers comprise Piaget, A. Lange & Sohne, Jaeger-LeCoultre, Vacheron Constantin, Officine Panerai, IWC, Baume & Mercier and Roger Dubuis. * Writing Instrument Maison - business whose primary activity includes the design, manufacture and distribution of writing instruments, namely Montblanc. * Leather and Accessories Maisons - businesses whose principal activities include the design and distribution of leather goods and other accessories, being Alfred Dunhill and Lancel. 1. Segment information A business segment is a group of assets and operations engaged in providing products that are subject to risks and returns that are different from those of other business segments. The Group has identified business segments as the primary segments. A geographical segment is engaged in providing products within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. The Group uses geographical segments as the secondary segments. (a) Primary reporting format - business segments For the purposes of clarity and comparability of external reporting, the Group combines internal management units with similar risk and reward profiles into business operating segments, which are constituted as follows: * Jewellery Maisons - businesses whose heritage is in the design, manufacture and distribution of jewellery products; these comprise Cartier and Van Cleef & Arpels. * Specialist Watchmakers - businesses whose primary activity includes the design, manufacture and distribution of precision timepieces. The Group`s Other Group operations mainly comprise Chloe, royalty income and other businesses. None of these constitutes a separately reportable segment. Amounts included in `Corporate` represent the costs of the Group`s corporate operations which are not attributed to the segments. The entire product range of a particular Maison, which may include jewellery, watches, writing instruments and leather goods, is reflected in the sales and operating result for that segment. Segment assets consist primarily of property, plant and equipment, inventories, trade and other debtors and non-current assets. Segment liabilities comprise operating liabilities, including provisions, but exclude short and long-term loans and bank overdrafts. Inter-segment transactions are transacted at prices that reflect the risk and rewards transferred and are entered into under normal commercial terms and conditions. The segment results for the years ended 31 March are as follows: Sales Inter-segment sales 2009 2008 2009 2008
re- re- presented presented Sales EURO m EURO m EURO EURO m m
Jewellery Maisons 2 762 2 657 1 1 Specialist Watchmakers 1 437 1 378 12 7 Writing Instrument 595 637 1 1 Maison Writing Instrument ( 8) ( 12) - - Maison - discontinued operations Leather and Accessories 294 309 - - Maisons Other Businesses 338 321 163 105 5 418 5 290 177 114 Total segment sales
2009 2008 re-presented Sales EURO m EURO m Jewellery Maisons 2 763 2 658 Specialist Watchmakers 1 449 1 385 Writing Instrument Maison 596 638 Writing Instrument Maison - discontinued ( 8) ( 12) operations Leather and Accessories Maisons 294 309 Other Businesses 501 426 5 595 5 404
2009 2008 re-presented Operating result from continuing EURO m EURO m operations Jewellery Maisons 777 765 Specialist Watchmakers 287 374 Writing Instrument Maison 69 126 Leather and Accessories Maisons ( 10) ( 5) Other Businesses ( 1) 16 Corporate ( 140) ( 158) Operating profit 982 1 118 Finance costs -228 -114 Finance income 127 161 Operating profit before share of results 881 1 165 of associated undertakings Share of post-tax profit of associated 3 1 undertakings Profit before taxation 884 1 166 Taxation ( 133) ( 194) Profit from continuing operations 751 972 Profit from discontinued operations 325 592 Net profit 1 076 1 564 (a) Primary reporting format - business segments (continued) Net segment assets at 31 March are as follows: Segment assets 2009 2008 re-presented Net segment assets EURO m EURO m Jewellery Maisons 1 995 1 759 Specialist Watchmakers 1 436 1 004 Writing Instrument Maisons 462 443 Leather and Accessories 201 178 Maisons Other Businesses 411 459 Corporate 555 503 5 060 4 346
Investments in associated 14 3 008 undertakings Cash and cash equivalents 2 032 2 094 Short-term loans and - - borrowings Retirement benefit - - obligations Deferred and current income 305 257 tax, net 7 411 9 705 Segment liabilities
2009 2008 Net segment assets EURO m EURO m Jewellery Maisons ( 292) ( 295) Specialist Watchmakers ( 201) ( 164) Writing Instrument Maisons ( 80) ( 86) Leather and Accessories Maisons ( 50) ( 60) Other Businesses ( 91) ( 111) Corporate ( 363) ( 233) ( 1 077) ( 949) Investments in associated - - undertakings Cash and cash equivalents ( 669) ( 323) Short-term loans and borrowings ( 541) ( 525) Retirement benefit obligations ( 39) ( 42) Deferred and current income ( 250) ( 247) tax, net ( 2 576) ( 2 086) Net segment assets
2009 2008 re-presented Net segment assets EURO m EURO m Jewellery Maisons 1 703 1 464 Specialist Watchmakers 1 235 840 Writing Instrument Maisons 382 357 Leather and Accessories Maisons 151 118 Other Businesses 320 348 Corporate 192 270 3 983 3 397 Investments in associated 14 3 008 undertakings Cash and cash equivalents 1 363 1 771 Short-term loans and borrowings ( 541) ( 525) Retirement benefit obligations ( 39) ( 42) Deferred and current income 55 10 tax, net 4 835 7 619 Other segment information for the years ended 31 March is as follows: Depreciation/ Items related to Capital amortisation expenditure charge property, plant, 2009 2008 2009 2008 equipment and intangible EURO EURO EURO m EURO m assets m m Jewellery Maisons 105 107 74 63 Specialist 86 61 43 31 Watchmakers Writing Instrument 34 43 31 21 Maisons Leather and 25 25 12 11 Accessories Maisons Other Businesses 52 36 30 19 Corporate 48 39 28 29 350 311 218 174
Items related to Impairment charge property, plant, 2009 2008 equipment and intangible EURO EURO assets m m Jewellery Maisons 1 - Specialist 1 - Watchmakers Writing Instrument - - Maisons Leather and - - Accessories Maisons Other Businesses 3 - Corporate 1 - 6 -
Share option costs 2009 2008 Other non-cash items EURO m EURO m Jewellery Maisons 6 6 Specialist Watchmakers 5 5 Writing Instrument Maisons 2 2 Leather and Accessories 1 1 Maisons Other Businesses 1 1 Corporate 16 16 31 31 (b) Secondary reporting format - geographical segments Sales, segment assets and capital expenditure in the three main geographical areas where the Group`s business segments operate are as follows in respect of the years ended 31 March: Sales
2009 2008 re-presented EURO m EURO m Europe 2 363 2 284 France 500 493 Switzerland 288 257 Germany, Italy and Spain 611 681 Other Europe 964 853 Asia 2 166 1 994 China/Hong Kong 921 790 Japan 692 699 Other Asia 553 505 Americas 889 1 012 USA 662 775 Other Americas 227 237
5 418 5 290 Segment assets at 31 March 2009 2008 re-presented
EURO m EURO m Europe 3 793 3 244 France 542 505 Switzerland 2 245 1 895 Germany, Italy and Spain 487 488 Other Europe 519 356 Asia 815 671 China/Hong Kong 357 236 Japan 286 292 Other Asia 172 143 Americas 452 431 USA 379 341 Other Americas 73 90 5 060 4 346 Capital expenditure
2009 2008 EURO m EURO m Europe 236 194 France 26 25 Switzerland 137 92 Germany, Italy and Spain 31 30 Other Europe 42 47 Asia 85 75 China/Hong Kong 53 34 Japan 14 30 Other Asia 18 11 Americas 29 42 USA 24 36 Other Americas 5 6
350 311 Sales are allocated based on the location of the customer or the boutique. Segment assets and capital expenditure are allocated based on where the assets are located. 2. Investments in associated undertakings BAT Other Total EURO m EURO m EURO m At 1 April 2007 3 497 9 3 506 Exchange adjustments ( 523) ( 1) ( 524) Share of post-tax profit - 1 1 Discontinued operations 609 - 609 Dividends received ( 325) - ( 325) Acquisition of associated - 1 1 undertakings Other equity movements arising from: - expenses recognised directly in ( 87) - ( 87) equity - transactions with equityholders ( 173) - ( 173) At 31 March 2008 2 998 10 3 008 Exchange adjustments 20 ( 1) 19 Share of post-tax profit - 3 3 Discontinued operations 355 - 355 Dividends received ( 343) - ( 343) Acquisition of associated - 3 3 undertakings Other equity movements arising from: - expenses recognised directly in 101 - 101 equity - transactions with equityholders ( 71) ( 1) ( 72) Indirect disposal on partial (3 060) - (3 060) liquidation of parent group At 31 March 2009 - 14 14 Investments in associated undertakings at 31 March 2009 include goodwill of EURO 5 million (2008: EURO 2 200 million). British American Tobacco plc (`BAT`) The summarised financial information in respect of the Group`s share of results of its principal associated undertaking, BAT, till the date of Group`s restructuring is as follows: Period to Year to 20 October 2008 31 March 2008 EURO m EURO m Operating profit 519 826 After: Share of other expense ( 8) ( 27) Finance costs ( 63) ( 137) Finance income 15 53 Share of post-tax profit of 62 134 associates Profit before taxation 533 876 Taxation ( 150) ( 223) Net profit 383 653 Attributable to: Shareholders` equity 355 609 Minority interest 28 44 383 653 The Group`s share of results and retained reserves of BAT for the six-month period to 30 September 2008 have been derived from accounts drawn up to that date, and for the period from 1 October to 20 October 2008 from estimates by management using the average daily profit of BAT for the preceding six-month period. Changes in the Group`s percentage holding of BAT during the years ended 31 March 2009 and 2008 relate to the share buy-back programme carried out by BAT. The following table indicates the percentages applied to BAT`s profits: For the period to 20 October 2008 Percentage 1 April 2008 to 30 June 2008 19.4 1 July 2008 to 20 October 2008 19.5 For the year ended 31 March 2008 1 April 2007 to 30 June 2007 19.1 1 July 2007 to 31 March 2008 19.3 On 20 October 2008 the Group effectively disposed of its entire holding in BAT through the partial liquidation of Richemont SA (note 6). The market capitalisation of BAT ordinary shares at 20 October 2008 was GBP 34 303 million (31 March 2008: GBP 38 126 million). The fair value of the Group`s effective interest of 19.5 per cent in BAT ordinary shares at that date was EURO 8 664 million (31 March 2008: effective interest: 19.3 per cent; fair value: EURO 9 250 million). 3. Other operating (expense) / income 2009 2008
EURO m EURO m Royalty income - net 16 15 Amortisation of intangible assets acquired ( 13) ( 3) on business combinations Other expenses ( 30) ( 2) ( 27) 10 4. Net finance (costs) / income 2009 2008
Finance income: EURO m EURO m Interest income on bank and other deposits 73 82 Dividend income on financial assets at fair 1 6 value through profit or loss Net gain in fair value of financial assets - 9 at fair value through profit or loss Net foreign exchange gains on monetary 53 - items Mark-to-market adjustment in respect of - 64 hedging activities Finance income 127 161
Finance costs: Interest expense: - bank borrowings ( 37) ( 35) - other financial expenses ( 1) ( 1) Net loss in fair value of financial assets ( 18) - at fair value through profit or loss Mark-to-market adjustment in respect of ( 172) - hedging activities Net foreign exchange losses on monetary - ( 78) items Finance costs ( 228) ( 114)
Net finance (costs) / income ( 101) 47 Foreign exchange gains resulting from effective hedge derivative instruments of EURO 12 million (2008: gains of EURO 13 million) were reflected in cost of sales during the year. Gains and losses on all non-hedge derivatives, as well as the ineffective portion of hedge derivatives, are included in net finance (costs) / income. 5. Taxation Taxation charge in the income statement: 2009 2008 re-presented EURO m EURO m Current tax 152 204 Deferred tax ( 19) ( 10) (credit)/charge 133 194 The average effective tax rate is calculated in respect of profit before taxation but excluding the share of post-tax profit of associated undertakings. The rates for the years ended 31 March 2009 and 2008 were 15.7 per cent and 16.9 per cent respectively. 6. Discontinued operations British American Tobacco (`BAT`) In their Extraordinary General Meeting held on 9 October 2008 the shareholders of Compagnie Financiere Richemont SA approved the restructuring of its business by splitting its luxury goods businesses from its other interests, which include its interest in BAT and other assets, including cash of EURO 351 million. The de-twinning of the shares of the Company and the participation certificates of Richemont SA was effected on 20 October 2008. As part of the restructuring, Richemont SA distributed to the Company its entire holdings in the share capital of the entities holding the luxury goods businesses in compensation of the cancellation of the share capital of Richemont SA, 100 per cent held by the Company. The cancellation of the shares of Richemont SA represents a disposal to the unitholders of the residual interests of Richemont SA which comprised principally its interest in BAT and other assets. The deconsolidation of Richemont SA generates no gain or loss through profit or loss as it represents a partial liquidation of Richemont SA in the context of a Group restructuring. In addition to BAT, management has authorised and is actively involved in the disposal of two small business units. The results and cash flows of the discontinued operations include the share of post tax profit and dividends received from BAT, and the two business units mentioned above. Management considers the net costs and cash flows of other assets disposed of to be immaterial. Results of discontinued operations 2009 2008 EURO m EURO m Sales 9 12 Cost of sales ( 21) ( 19) Gross loss ( 12) ( 7) Selling and distribution expenses ( 3) ( 4) Communication expenses ( 2) ( 6) Administrative expenses ( 1) - Other operating income ( 12) - Operating profit ( 30) ( 17) Finance costs - - Finance income - - Share of post-tax profit of associated 355 609 undertakings Profit before taxation 325 592 Taxation - - Profit from discontinued operations 325 592 Cash flow generated from / (used in) 2009 2008 discontinued operations EURO m EURO m Net cash generated from operating 335 314 activities (operating) Disposal of discontinued operations net of (351) - cash disposed of (financing) ( 16) 314 Effect of disposal on the financial position of 2009 the Group EURO m Investment in associated undertaking 3 060 Financial assets held at fair value through 76 profit or loss Other non-current assets 3 Deferred income tax liabilities ( 1) Current income tax liabilities ( 1) Accruals and deferred income ( 2) Cash 351 7. Earnings per share 7.1. Basic Basic earnings per share is calculated by dividing the profit attributable to shareholders by the weighted average number of shares in issue during the year, excluding shares purchased by the Company and held in treasury. 2009 2008
Profit attributable to shareholders of 750 973 the Company (EURO millions) Profit from discontinued operations attributable to shareholders of the Company (EURO millions) 325 592 1 075 1 565 Weighted average number of shares in 559.5 561.1 issue (millions) 7.2. Diluted Diluted earnings per share is calculated adjusting the weighted average number of shares outstanding, which assumes conversion of all dilutive potential shares. The Company has only one category of dilutive potential shares: share options. The calculation is performed for the share options to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company`s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. 2009 2008
Profit attributable to shareholders of the 750 973 Company (EURO millions) Profit from discontinued operations attributable 325 592 to shareholders of the Company (EURO millions) 1 075 1 565 Weighted average number of shares in issue 559.5 561.1 (millions) Adjustment for share options (millions) 1.5 8.0 Weighted average number of shares for diluted 561.0 569.1 earnings per share (millions) 8. Inventories 2009 2008 EURO m EURO m Raw materials and work in 819 803 progress Finished goods 1 603 1 273 2 422 2 076 The cost of inventories recognised as an expense and included in cost of sales amounted to EURO 1 763 million (2008: EURO.1 713 million). The Group reversed EURO 68 million (2008: EURO 24 million) of a previous inventory write-down during the year as the goods were sold at an amount in excess of the written down value. The amount reversed has been credited to cost of sales. The Group recognised EURO 124 million (2008: EURO 75 million) in the write- down of inventory as a charge to cost of sales. 9. Cash flow generated from operating activities 2009 2008
re- presented EURO m EURO m
Operating profit 951 1 101 Depreciation and impairment of property, 175 139 plant and equipment Amortisation and impairment of intangible 49 35 assets Loss on disposal of property, plant and 1 1 equipment Profit on disposal of intangible assets - ( 2) (Decrease)/ Increase in provisions ( 11) 2 Decrease in retirement benefit ( 5) ( 60) obligations Non-cash items 20 19 Increase in inventories ( 218) ( 308) Decrease/(increase) in trade debtors 21 ( 11) Increase in other receivables, ( 15) ( 6) prepayments and accrued income (Decrease)/increase in current ( 154) 58 liabilities Increase in long-term liabilities 5 - Cash flow generated from operations 819 968 10. Share-based payment Share option scheme The Group has a long-term share-based compensation plan whereby executives are awarded options to acquire shares at the market price on the date of grant. Awards under the share option scheme vest over periods of three to eight years and have expiry dates, the date after which unexercised options lapse, of between five and thirteen years from the date of grant. The executive must remain in the Group`s employment until vesting. The options granted as from 2008 onwards include a performance condition correlated to other luxury goods companies upon which vesting is conditional. During the year ended 31 March 2009, awards of 5 069 241 options were granted at a weighted average exercise price of CHF21.20 per share. Options in respect of 265 521 shares were exercised during the year at an average exercise price of CHF11.03 per share. Modification during the year under review On 20 October 2008 the Company split its luxury goods businesses from its other interests resulting in the de-twinning of the existing Richemont units. The de-twinning process impacted the value and the number of stock options awarded to executives. Richemont unit options, which had vested but were not yet exercised at the date of the restructuring, have been converted into options over Richemont shares, options over BAT shares and options over Reinet shares. The exchange ratio used, determined at market prices at close of business on the date of de-twinning, was calculated to preserve the economic benefits of the Richemont option holders. Richemont unit options which had not vested at the date of the restructuring were converted in their entirety into options over Richemont shares. The fair value of the outstanding options immediately before and after the modification was recalculated using the binomial model. The significant inputs into the model were the risk free interest rates set as at the date of the modification, the dividend yield based on historical values ignoring any special dividends (a zero dividend yield and an estimated share price were used for Reinet), an expected option life between zero and seven years and an early exercise assumption based on expected rational behaviour, and the seniority of the management and the relative values of the BAT share price (GBP17.14) and the CFR unit price (CHF 42.90) at the date of modification. The volatility for BAT was based on a historic six-year average. The historic volatility and estimated price of the new Richemont share was determined by decomposing the Richemont unit price into the component parts of the luxury goods businesses, and BAT and other assets. The volatility of Reinet was based on nine comparative listed companies. Exchange rates The results of the Group`s subsidiaries and associates which do not report in euros have been translated at the following average rates of exchange against the euro. The balance sheet of those subsidiaries and associates have been translated into euros at the closing rates set out below. Exchange rates Year to Year to against the Euro March 2009 March 2008 Average United States dollar 1.42 1.42 Japanese yen 143.07 161.59 Swiss franc 1.56 1.64 Pound sterling 0.84 0.71 31 March 2009 31 March 2008 Closing United States dollar 1.33 1.58 Japanese yen 130.92 157.82 Swiss franc 1.51 1.57 Pound sterling 0.93 0.80 Statutory Information Trading of Richemont `A` units ceased with effect from close of business on 20 October 2008. Accordingly, the following statutory information relates specifically to Compagnie Financiere Richemont SA shares. `A` shares issued by the Swiss parent company, Compagnie Financiere Richemont SA, are listed and traded on the SIX Swiss Exchange, (Reuters "CFR.VX" / Bloombergs "CFR:VX" / ISIN CH0045039655) and are included in the Swiss Market Index (`SMI`) of leading stocks. South African Depository Receipts in respect of Richemont `A` shares are traded on the Johannesburg Stock Exchange operated by JSE Limited (Reuters "CFRJ.J" / Bloombergs "CFR:SJ" / ISIN CH0045159024). Based on the valuation of the underlying assets of the Group at the time the restructuring was effected, the luxury business owned by Compagnie Financiere Richemont SA and therefore represented by the `A` share was calculated as being 43.65967 per cent of the last traded value of the Richemont `A` units at the close of business on 20 October 2008, the balance of the closing unit price being attributable to the Reinet Investments SCA share. Accordingly, of the actual market closing price CHF 42.90 per `A` unit, CHF 18.73 was attributable to the Compagnie Financiere Richemont SA `A` share and the remainder, being CHF 24.17, was attributable to the Reinet Investments SCA share. The closing price of the Richemont `A` share on 31 March 2009 was CHF 17.78 and the market capitalisation of the Group`s `A` shares on that date was CHF 9 281 million. Over the preceding twelve months, the highest closing price of the `A` share equivalent was CHF 30.04 (former `A` unit: CHF 68.80) on 19 May 2008, and the lowest closing price of the `A` share was CHF 14.23 on 3 March 2009. The consolidated financial statements have been audited by PricewaterhouseCoopers SA, Switzerland. That firm`s unqualified audit report is available for inspection at the registered office of Richemont in Bellevue Geneva, Switzerland. Compagnie Financiere Richemont SA Registered office: 50 chemin de la Chenaie 1293 Bellevue Geneva Switzerland Tel: (+41) (0) 22 721 3500 Fax: (+41) (0) 22 721 3550 Internet: www.richemont.com E-mail: investor.relations@cfrinfo.net secretariat@cfrinfo.net
pressoffice@cfrinfo.net Further information regarding Reinet Investments SCA, the vehicle separated from Richemont in the de-twinning effected on 20 October 2008, can be found on that company`s website: www.reinet.com (c) Richemont 2009 Notes for South African editors Acknowledging the interest in Richemont`s results on the part of South African investors, set out below are key figures from the results expressed in rand. The average euro/rand exchange rate prevailing during the year ended 31 March 2009 was 12.489; this compares with a rate of 10.105 during the prior year. in ZAR millions March 2009 March 2008 re-
presented Sales 67 665 53 455 + 27 % Operating profit 12 264 11 297 + 9 % Profit from continuing 9 379 9 822 - 5 % operations Net profit from discontinued 4 059 5 982 - 32 % operations Net profit 13 438 15 804 - 15 % Analysed as follows Net profit attributable to 13 426 15 814 shareholders Net profit attributable to 12 ( 10) minority interests 13 438 15 804
Earnings per depositary receipt from continuing operations - ZAR 1.6698 ZAR 1.7280 - 3 % diluted basis Operating profit in the year under review included one-off charges of ZAR 987 million or EURO 79 million. The comparative figure in the prior year was ZAR 71 million or EURO 7 million. The Group`s share of the results of its former associate, British American Tobacco, is included within discontinued operations in the table above. Subject to approval of the shareholders at the annual general meeting, scheduled to take place on 9 September 2009, it is currently anticipated that the dividend will be paid to Richemont Depository Receipt holders on 25 September 2009. The rand dividend amount per Depository Receipt will be calculated by reference to the Swiss franc/rand exchange rate prevailing on the currency conversion date in September 2009. Richemont Securities AG Depository Receipts are issued subject to the terms of the Deposit Agreement dated 25 August 1988 as amended on 18 December 1992, 28 September 2001 and 7 August 2008. By holding Depository Receipts, investors acknowledge that they are bound by the terms of the Deposit Agreement. Copies of the Deposit Agreement may be obtained by investors from Richemont Securities AG or Computershare Limited. Date: 14/05/2009 07:31:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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