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Richemont, the Swiss luxury goods group, announces its unaudited consolidated results for the six month period ended
Compagnie Financière Richemont SA Depositary Receipts
issued by Richemont Securities SA
(Incorporated in Switzerland)
ISIN: CH0045159024
Depositary Receipt Code: CFR
COMPANY ANNOUNCEMENT â FOR IMMEDIATE RELEASE
Richemont, the Swiss luxury goods group, announces its unaudited consolidated results
for the six month period ended 30 September 2012
Financial highlights
* Sales grew by 21 % to ⬠5 106 million, or by 12 % at constant exchange rates
* Solid growth across segments, regions and channels
* Operating profit increased by 28 % to ⬠1 380 million, benefitting from favourable currency movements
* Operating margin gained 150 basis points to reach 27 %
* Profit for the period rose by 52 % to ⬠1 081 million
* Cashflow from operations of ⬠575 million
+---------------------+---------------------------+---------+---------+
|Key financial |6 months ended 30 September| | |
|data (unaudited) | | | |
+---------------------+---------------------------+---------+---------+
| | 2012| 2011| Change|
+---------------------+---------------------------+---------+---------+
| | | | |
+---------------------+---------------------------+---------+---------+
|Sales | ⬠5 106 m|⬠4 214 m| + 21 %|
+---------------------+---------------------------+---------+---------+
|Gross profit | ⬠3 310 m|⬠2 665 m| + 24 %|
+---------------------+---------------------------+---------+---------+
|Gross margin | 64.8 %| 63.2 %|+ 160 bps|
+---------------------+---------------------------+---------+---------+
|Operating profit | ⬠1 380 m|⬠1 075 m| + 28 %|
+---------------------+---------------------------+---------+---------+
|Operating margin | 27.0 %| 25.5 %|+ 150 bps|
+---------------------+---------------------------+---------+---------+
|Profit for the period| ⬠1 081 m| ⬠709 m| + 52 %|
+---------------------+---------------------------+---------+---------+
|Earnings per share, | ⬠1.947| ⬠1.266| + 54 %|
|diluted basis | | | |
+---------------------+---------------------------+---------+---------+
| | | | |
+---------------------+---------------------------+---------+---------+
|Cashflow generated | ⬠575 m| ⬠606 m| - ⬠31 m|
|from operations | | | |
+---------------------+---------------------------+---------+---------+
|Net cash position | ⬠3 048 m|⬠2 596 m|+ ⬠452 m|
+---------------------+---------------------------+---------+---------+
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 risk and uncertainties, many of which are outside the Groupâs 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 and Chief Executive Officerâs commentary
Richemont is reporting a solid set of results for the first half of this year. The Groupâs Maisons benefitted from favourable exchange rates effects, successful product launches as well as strong pricing power.
The increase in net profit was well above the prior period, reflecting both the growth in operating results and the non-recurrence of non-cash losses, which stemmed from the Swiss francâs appreciation against the euro based on the closing Swiss franc rate.
Richemontâs financial position continues to be strong: the Groupâs net cash position is ⬠3 billion.
Sales growth rates moderated, as evidenced by the October sales which grew by 12 % at actual exchange rates. At constant exchange rates, they were 7 % higher. Richemont is seeing good growth in Europe, supported by Asian tourism which is compensating for slower domestic Asia Pacific sales. Retail continued to lead wholesale, reflecting robust jewellery sales.
For the second half of the year, the comparatives are likely to be impacted by less favourable exchange rates.
With a view to strengthening the manufacturing base and exploiting growth opportunities as they arise, the Groupâs Maisons will execute their investment programmes as planned.
Johann Rupert, Executive Chairman and Chief Executive Officer
Compagnie Financière Richemont SA
Geneva, 9 November 2012
***
Financial Review
Sales
Sales in the six-month period increased by 21 % at actual exchange rates, or by 12 % at constant exchange rates. The increase in sales reflected, in particular, sales growth in the Groupâs own retail network, bolstered by very strong demand in Europe during the period. Further details of sales by region, distribution channel and business area are given in the Review of Operations on pages 5 to 8.
Gross profit
Gross profit rose by 24 % and the gross margin percentage was 160 basis points higher at 64.8 % of sales. Several factors caused the increase in the gross margin percentage, in particular favourable currency movements. Other favourable factors included the impact of price increases and the growing proportion of sales made through the Maisonsâ own boutiques. These favourable factors were partly offset by the impact of the cessation of hedge accounting, which was initiated in the prior year. In the current period, foreign exchange losses recognised in the gross margin were immaterial whereas gains in the prior period added 166 basis points to the gross margin percentage.
Operating profit
Operating profit increased by 28 %, reflecting the significant increase in gross profit, offset by an increase in operating expenses of 21 %, or 14 % at constant exchange rates.
Selling and distribution expenses were 23 % higher, reflecting in particular the increase in sales in the Maisonsâ own boutique networks. Communication expenses also increased by 23 % and represented 8 % of sales. Administration costs rose by 19 % and reflected the expansion of certain of the Groupâs shared service platforms.
As a consequence, operating margin increased by 150 basis points to 27.0 % in the period under review.
Profit for the period
Profit for the period increased by 52 % to ⬠1 081 million, reflecting the following significant items:
* Within net finance costs, ⬠142 million of mark-to-market losses have been recorded in respect of currency hedging activities (2011: losses of ⬠113 million).
* In the comparative period, the Swiss francâs appreciation against the euro generated reported non-cash losses of ⬠153 million in respect of the Groupâs cash position. In the period under review, there were no such non-cash losses as a consequence of the stable euro: Swiss franc exchange rate.
The effective taxation rate was 15.6 %, reflecting the anticipated full-year rate, which is in line with prior periods.
Earnings per share increased by 54 % to ⬠1.947 on a diluted basis. To comply with the South African practice of providing headline earnings per share (âHEPSâ) data, the relevant figure for headline earnings for the period ended 30 September 2012 would be ⬠1 087 million (2011: ⬠713 million). Basic HEPS for the period was ⬠1.983 (2011: ⬠1.303). Diluted HEPS for the period was ⬠1.949 (2011: ⬠1.273). Further details regarding earnings per share and HEPS, including an itemised reconciliation, may be found in note 8 of the Groupâs condensed consolidated interim financial statements.
Cashflow
Cashflow generated from operations was ⬠575 million, broadly in line with the prior period. The additional cash generated from operating profit was absorbed by working capital movements and settlement of maturing foreign exchange contracts.
The net acquisition of tangible fixed assets amounted to ⬠217 million, reflecting selected investments in the Groupâs network of boutiques, particularly in the Asia Pacific region, and further investments in manufacturing facilities in Switzerland.
The 2012 dividend, at CHF 0.55 per share, was paid to shareholders net of withholding tax in September. The cash outflow in the period amounted to ⬠164 million; the withholding tax was remitted to the Swiss authorities in October.
During the period, the Group acquired some 6 million âAâ shares to hedge executive stock options. The cost of these purchases was partly offset by proceeds from the exercise of stock options by executives and other activities linked to the hedging programme, leading to a net outflow of ⬠86 million.
Financial structure and balance sheet
Inventories at the end of September amounted to ⬠4 033 million. This figure represents 16 months of gross inventories and is in line with the rotation at September 2011. The stable rate of stock turn reflects the favourable trading conditions in particular. In absolute terms, the increase in the value of inventories resulted from the strategic build-up of inventories and the expansion of the Maisonsâ boutique networks.
At 30 September 2012, the Groupâs net cash position amounted to ⬠3 048 million, broadly in line with the position at 31 March 2012. The Groupâs net cash position includes short-term liquid funds as well as cash, cash equivalents and all borrowings. Liquid money market funds, government bond funds and cash balances were primarily denominated in euros, whereas borrowings to finance local operating assets are denominated in the currencies of the countries concerned. Total borrowings, including bank borrowings and short-term loans, amounted to ⬠213 million.
Richemont's financial structure remains very strong, with shareholdersâ equity representing 71 % of total equity and liabilities.
***
Review of operations
1. Sales by region
+-------------+------------++------------+--------------+---------------+
| | || |Movement at: | |
+-------------+------------++------------+--------------+---------------+
|In ⬠millions|30 September||30 September|Constant |Actual exchange|
| |2012 ||2011 |exchange rates|rates |
+-------------+------------++------------+--------------+---------------+
|Europe | 1 857|| 1 514|+ 19 % |+ 23 % |
+-------------+------------++------------+--------------+---------------+
|Asia Pacific | 2 103|| 1 718|+ 9 % |+ 22 % |
+-------------+------------++------------+--------------+---------------+
|Americas | 698|| 602|+ 4 % |+ 16 % |
+-------------+------------++------------+--------------+---------------+
|Japan | 448|| 380|+ 4 % |+ 18 % |
+-------------+------------++------------+--------------+---------------+
| | 5 106|| 4 214|+ 12 % |+ 21 % |
+-------------+------------++------------+--------------+---------------+
*Note: movements at constant exchange rates are calculated translating underlying sales in local currencies into euros in both the current year and the comparative year at the average exchange rates applicable for the financial year ended 31 March 2012.
Europe
Europe accounted for 36 % of overall sales. The region enjoyed good growth, with visitors/travellers driving the above-average increase. The highest growth rates were in the Maisonsâ own boutiques in tourist destinations, including the Middle East.
Asia Pacific
Sales in the Asia Pacific region accounted for 41 % of the Group total, with Hong Kong and mainland China the two largest markets. Following two years of exceptionally high rates of sales growth, the rate during the period under review moderated. Sales growth in our Maisonsâ own boutiques in the region was well above the increase in sales to wholesale partners, partly reflecting the number of boutique openings in the last two years.
Americas
After two years of outstanding sales, the Americas region reported single-digit growth before currency translation effects and represented 14 % of Group sales. Certain exceptional High Jewellery sales took place in the comparative period, primarily in the Jewellery Maisons.
Japan
The increase in sales in Japan reflected the continued momentum in all segments.
2. Sales by distribution channel
+-------------+------------++------------+--------------+---------------+
| | || |Movement at: | |
+-------------+------------++------------+--------------+---------------+
|In ⬠millions|30 September||30 September|Constant |Actual exchange|
| |2012 ||2011 |exchange rates|rates |
+-------------+------------++------------+--------------+---------------+
|Retail | 2 618|| 2 083|+ 15 % |+ 26 % |
+-------------+------------++------------+--------------+---------------+
|Wholesale | 2 488|| 2 131|+ 8 % |+ 17 % |
+-------------+------------++------------+--------------+---------------+
| | 5 106|| 4 214|+ 12 % |+ 21 % |
+-------------+------------++------------+--------------+---------------+
*Note: movements at constant exchange rates are calculated translating underlying sales in local currencies into euros in both the current year and the comparative year at the average exchange rates applicable for the financial year ended 31 March 2012.
Retail
Overall retail sales, comprising directly operated boutiques and Net-a-Porter, increased by 26 %. This continues to be well above the growth in wholesale sales and 51 % of Group sales are now generated through its own retail network.
The growth in retail sales partly reflected the good performance of Net-a-Porter and the expansion of the Maisonsâ network of boutiques to 988 stores. Openings during the period were primarily in high-growth markets.
Wholesale
The Groupâs wholesale business, including sales to franchise partners, reported solid growth. This performance reflects the marketing environment in this channel.
3. Sales and operating results by business area
Jewellery Maisons
+-----------------++-----------------++-----------------+---------+
|In ⬠millions ||30 September 2012||30 September 2011| Change|
+-----------------++-----------------++-----------------+---------+
|Sales || 2 607|| 2 165| + 20 %|
+-----------------++-----------------++-----------------+---------+
|Operating results|| 958|| 734| + 31 %|
+-----------------++-----------------++-----------------+---------+
|Operating margin || 36.7 %|| 33.9 %|+ 280 bps|
+-----------------++-----------------++-----------------+---------+
The Jewellery Maisonsâ sales grew by 20 %. Both Cartier and Van Cleef & Arpels generated remarkable results.
The Maisonsâ boutique networks reported good growth and benefitted from boutique openings. Demand for High Jewellery pieces and more accessible jewellery ranges was strong. Demand for Cartierâs watch collections was solid.
The significant increase in sales and positive gross margin development generated an operating margin of 37 %.
Specialist Watchmakers
+-----------------++-----------------++-----------------+---------+
|In ⬠millions ||30 September 2012||30 September 2011| Change|
+-----------------++-----------------++-----------------+---------+
|Sales || 1 459|| 1 171| + 25 %|
+-----------------++-----------------++-----------------+---------+
|Operating results|| 470|| 312| + 51 %|
+-----------------++-----------------++-----------------+---------+
|Operating margin || 32.2 %|| 26.6 %|+ 560 bps|
+-----------------++-----------------++-----------------+---------+
The Specialist Watchmakersâ sales increased by 25 %, reflecting the worldwide demand for haute horlogerie.
Most Specialist Watchmakers contributed to the significant increase in the contribution margin to 32 %, reflecting the Maisonsâ pricing power and operating leverage in an environment where currency fluctuations were supportive.
Montblanc Maison
+----------------++-----------------++-----------------+---------+
|In ⬠millions ||30 September 2012||30 September 2011| Change|
+----------------++-----------------++-----------------+---------+
|Sales || 368|| 334| + 10 %|
+----------------++-----------------++-----------------+---------+
|Operating result|| 53|| 54| - 2 %|
+----------------++-----------------++-----------------+---------+
|Operating margin|| 14.4 %|| 16.2 %|- 180 bps|
+----------------++-----------------++-----------------+---------+
Montblancâs sales increased by 10 %: they were primarily driven by watches and currency effects. Compared with other Group businesses, Montblanc benefits less from sales in tourist destinations.
The Maisonâs operating margin decreased to 14 %.
Other
+-----------------++-----------------++-----------------+--------+
|In ⬠millions ||30 September 2012||30 September 2011| Change|
+-----------------++-----------------++-----------------+--------+
|Sales || 672|| 544| + 24 %|
+-----------------++-----------------++-----------------+--------+
|Operating results|| (15)|| (17)| + 12 %|
+-----------------++-----------------++-----------------+--------+
|Operating margin || (2.2) %|| (3.1) %|+ 90 bps|
+-----------------++-----------------++-----------------+--------+
âOtherâ includes the Groupâs Fashion and Accessories businesses, Net-a-Porter and the Groupâs watch component manufacturing activities.
Richemontâs Fashion & Accessories Maisons saw double-digit sales growth and operating profits were in line with the prior period at ⬠25 million.
Sales growth at Net-a-Porter is normalising but continues to exceed the Groupâs average. Net-a-Porter reduced its losses during the period, but generated a positive operating cashflow.
Losses at the Groupâs watch component manufacturing facilities were in line with the comparative period.
Corporate costs
+------------------------++-----------------++-----------------+------+
|In ⬠millions ||30 September 2012||30 September 2011|Change|
+------------------------++-----------------++-----------------+------+
|Corporate costs || (86)|| (8)| n/a|
+------------------------++-----------------++-----------------+------+
| || || | |
+------------------------++-----------------++-----------------+------+
|Central support services|| (78)|| (69)| + 13%|
+------------------------++-----------------++-----------------+------+
|Other operating || (8)|| 61| n/a|
|(expense)/income, net || || | |
+------------------------++-----------------++-----------------+------+
Corporate costs represent the costs of central management, marketing support and other central functions (collectively central support services), as well as other expenses and income which are not allocated to specific business areas. The increase in central support service reflects the support of IT systems and other long-term initiatives. On a constant exchange rate basis, the cost of central support services increased by 10 %. In the comparative period, other operating income included gains of ⬠70 million relating to the Groupâs exchange rate hedging programme, which are reported within gross profit. Following the cessation of hedge accounting, there were no material exchange rate gains or losses reported in gross profit in the period under review.
***
The Groupâs condensed consolidated financial statements of comprehensive income, of cashflows and of financial position are presented in Appendix 1. Richemontâs unaudited condensed consolidated interim financial statements for the period may be found on the Groupâs website at http://www.richemont.com/investor-relations/reports.html
Richard Lepeu, Deputy Gary Saage, Chief Financial Officer
Chief Executive Officer
Presentation
The results will be presented via a live internet webcast on 9 November 2012, starting at 09:00 (CET). The direct link will be available from 07:00 (CET) at: http://www.richemont.com (http://www.richemont.com/)
* Live listen-only telephone connection: call one of these numbers 10 minutes before the start of the presentation:
Europe: +41 91 610 56 00
USA: +1 866 291 4166
UK: +44 203 059 5862
South Africa: 0800 992 635 (toll free)
* An archived video webcast of the presentation will be available from:
http://www.richemont.com/investor-relations/results-presentations.html
* A transcript of the presentation will be available from:
http://www.richemont.com/investor-relations/results-presentations.html
Interim report
The Richemont 2012 Interim Report will be published on 15 November 2012 and will be available for download from the Groupâs website at http://www.richemont.com/investor-relations/reports.html; copies may be obtained from the Companyâs registered office or by contacting the Company via the website at http://www.richemont.com/about-richemont/contact.html
Compagnie Financière Richemont SA
Registered office:
50 chemin de la Chênaie
CP30, 1293 Bellevue Geneva
Switzerland
Tel : +41 22 721 3500
Fax : +41 22 721 3550
Internet: www.richemont.com
Media contact
Alan Grieve
Director of Corporate Affairs
Tel: +41 22 721 3507
E-mail: pressoffice@cfrinfo.net
Investor contact
Sophie Cagnard
Head of Investor Relations
Tel +33 1 58 18 25 97
E-mail: investor.relations@cfrinfo.net
Statutory Information
Primary listing
SIX Swiss Exchange (Reuters "CFR.VX" / Bloomberg "CFR:VX" / ISIN CH0045039655). The Swiss âValorennummerâ is 4503965. Richemont âAâ bearer shares are included in the Swiss Market Index (âSMIâ) of leading stocks.
Secondary listing
Johannesburg stock exchange operated by JSE Limited (Reuters "CFRJ.J" / Bloomberg "CFR:SJ" / ISIN CH0045159024). South African depository receipts in respect of Richemont âAâ shares.
The closing price of the Richemont âAâ share on 30 September 2012 was CHF 56.40 and the market capitalization of the Groupâs âAâ shares on that date was CHF 29 441 million. Over the preceding six month period, the highest closing price of the âAâ share was CHF 64.15 (10 September) and the lowest closing price of the âAâ share was CHF 48.40 (12 July).
© Richemont 2012
Appendix 1
Condensed consolidated statement of comprehensive income
Six months to Six months to
30 September 2012 30 September 2011
⬠m ⬠m
Sales 5 106 4 214
Cost of sales (1 796) (1 549)
Gross profit 3 310 2 665
Selling and distribution expenses (1 096) ( 891)
Communication expenses ( 418) ( 340)
Administrative expenses ( 408) ( 342)
Other operating (expense)/income ( 8) ( 17)
Operating profit 1 380 1 075
Finance costs ( 156) ( 287)
Finance income 57 61
Share of post-tax results ( 1) ( 1)
of associated undertakings
Profit before taxation 1 280 848
Taxation ( 199) ( 139)
Profit for the period 1 081 709
Other comprehensive (loss)/income:
Currency translation adjustments
- movement in the period ( 30) 427
- reclassification to - 1
profit or loss
Cash flow hedges
- net gains - 20
- reclassification to 1 ( 70)
profit or loss
Other comprehensive (loss)/income, ( 29) 378
net of tax
Total comprehensive income 1 052 1 087
Profit attributable to:
Owners of the parent company 1 086 709
Non-controlling interests ( 5) -
1 081 709
Total comprehensive income
attributable to:
Owners of the parent company 1 057 1 086
Non-controlling interests ( 5) 1
1 052 1 087
Earnings per share attributable to
owners of the parent
company during the
period (expressed in ⬠per share)
Basic 1.981 1.295
Diluted 1.947 1.266
Condensed consolidated statement of cash flows
Six months to Six months to
30 September 2012 30 September 2011
⬠m ⬠m
Operating profit 1 380 1 075
Depreciation and impairment of 141 119
property, plant and equipment
Amortisation and impairment of 43 43
other intangible assets
Loss on disposal of 1 -
property, plant and equipment
Increase in provisions 25 26
Decrease in retirement ( 1) ( 3)
benefit obligations
Non-cash items 13 ( 55)
Increase in inventories ( 367) ( 340)
Increase in trade debtors ( 289) ( 288)
Increase in other ( 32) ( 27)
receivables and prepayments
(Decrease)/increase in current and ( 339) 56
long-term operating liabilities
Cash flow generated 575 606
from operations
Interest received 6 17
Interest paid ( 11) ( 13)
Other investment income 2 3
Taxation paid ( 150) ( 129)
Net cash generated 422 484
from operating activities
Cash flows from
investing activities
Acquisition of subsidiary
undertakings and
other businesses, net ( 30) ( 3)
of cash acquired
Acquisition of - ( 1)
associated undertakings
Acquisition of property, ( 218) ( 140)
plant and equipment
Proceeds from disposal of 1 17
property, plant and equipment
Acquisition of intangible assets ( 38) ( 29)
Acquisition of investment property ( 13) -
Investment in money market ( 2) ( 151)
and government bond funds
Proceeds from disposal of money 230 143
market and government bond funds
Acquisition of other ( 17) ( 16)
non-current assets
Proceeds from disposal of 7 9
other non-current assets
Net cash used ( 80) ( 171)
in investing activities
Cash flows from
financing activities
Proceeds from borrowings 127 10
Repayment of borrowings ( 4) ( 101)
Acquisition of ( 3) -
non-controlling interests
Dividends paid ( 164) ( 133)
Payment for treasury shares ( 206) ( 279)
Proceeds from sale 120 74
of treasury shares
Capital element of ( 1) ( 1)
finance lease payments
Net cash used ( 131) ( 430)
in financing activities
Net change in cash 211 ( 117)
and cash equivalents
Cash and cash equivalents 872 657
at beginning of period
Exchange gains on cash 5 32
and cash equivalents
Cash and cash equivalents 1 088 572
at end of period
Condensed consolidated statement of financial position
30 September 2012 31 March 2012
Assets ⬠m ⬠m
Non-current assets
Property, plant and equipment 1 590 1 529
Goodwill 491 479
Other intangible assets 314 316
Investment property 66 64
Investments in associated undertakings 9 10
Deferred income tax assets 483 443
Financial assets held at fair 64 69
value through profit or loss
Other non-current assets 298 248
3 315 3 158
Current assets
Inventories 4 033 3 666
Trade and other receivables 1 133 750
Derivative financial instruments 22 27
Prepayments 109 116
Financial assets held at fair 2 173 2 400
value through profit or loss
Cash at bank and on hand 2 433 1 636
9 903 8 595
Total assets 13 218 11 753
Equity and liabilities
Equity attributable to owners
of the parent company
Share capital 334 334
Treasury shares ( 596) ( 515)
Hedge and share option reserves 255 255
Cumulative translation 1 382 1 412
adjustment reserve
Retained earnings 7 950 7 123
9 325 8 609
Non-controlling interests 2 9
Total equity 9 327 8 618
Liabilities
Non-current liabilities
Borrowings 51 22
Deferred income tax liabilities 27 24
Retirement benefit obligations 31 33
Provisions 163 158
Other long-term financial liabilities 188 176
460 413
Current liabilities
Trade and other payables 901 948
Current income tax liabilities 403 299
Borrowings 1 4
Derivative financial instruments 90 124
Provisions 153 163
Accruals and deferred income 377 358
Short-term loans 161 62
Bank overdrafts 1 345 764
3 431 2 722
Total liabilities 3 891 3 135
Total equity and liabilities 13 218 11 753
9 November 2012
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Compagnie Financière Richemont SA
50, Chemin de la Chênaie CH-1293 Bellevue - Geneva Switzerland
Telephone +41 (0)22 721 3500 Telefax +41 (0)22 721 3550
www.richemont.com
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