Wrap Text
Richemont announces interim results ending 30 September 2018
Compagnie Financière Richemont SA
Depositary Receipts issued by Richemont Securities SA
("Richemont Securities" or "Richemont")
(Incorporated in Switzerland)
Share code: CFR
ISIN: CH0045159024
Depositary Receipt Code: CFR
COMPANY ANNOUNCEMENT
9 NOVEMBER 2018
RICHEMONT, THE SWISS LUXURY GOODS GROUP, ANNOUNCES ITS UNAUDITED CONSOLIDATED RESULTS FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2018
Financial highlights
* YOOX NET-A-PORTER GROUP (YNAP) and Watchfinder.co.uk (Watchfinder) consolidated in the Group's accounts since 1 May and 1 June 2018, respectively
* Group sales increased by 21% at actual exchange rates to EUR 6 808 million and by 24% at constant exchange rates
* Online retail* sales, now reported separately, amounted to 14% of Group sales
* Excluding YNAP and Watchfinder, sales rose by 6% at actual exchange rates and by 8% at constant exchange rates
* Growth in most regions and all business areas
* Double digit growth in the Group's directly operated boutiques, led by watches and jewellery
* Operating profit of EUR 1 130 million, down EUR 36 million following acquisition and disposal-related charges of EUR 159 million. Excluding impact of first-time consolidation of YNAP and Watchfinder, operating margin improved to 21.1%
* Profit for the period rose to EUR 2 253 million primarily due to a post-tax non-cash gain of EUR 1 378 million on the revaluation of YNAP shares held prior to buy-out
* Net cash position of EUR 1 584 million following acquisitions of YNAP and Watchfinder
Key financial data (unaudited)
+----------------------+-------------------+------------------+------------+
| |Six months ended |Six months ended |Change |
| |30 September 2018 |30 September 2017 | |
| | |**re-presented | |
+----------------------+-------------------+------------------+------------+
|Sales | EUR 6 808 m | EUR 5 620 m| +21%|
+----------------------+-------------------+------------------+------------+
|Gross profit | EUR 4 256 m| EUR 3 680 m| +16%|
+----------------------+-------------------+------------------+------------+
|Gross margin | 62.5 %| 65.5 %| -300 bps|
+----------------------+-------------------+------------------+------------+
|Operating profit | EUR 1 130 m| EUR 1 166 m| -3%|
+----------------------+-------------------+------------------+------------+
|Operating margin | 16.6 %| 20.7 %| - 410 bps|
+----------------------+-------------------+------------------+------------+
|Profit for the | EUR 2 253 m| EUR 974 m| +131%|
|period | | | |
+----------------------+-------------------+------------------+------------+
|Earnings per A share | EUR 3.987| EUR 1.721| +132%|
|/10 B shares, | | | |
|diluted basis | | | |
+----------------------+-------------------+------------------+------------+
| | | | |
+----------------------+-------------------+------------------+------------+
|Cash flow generated | EUR 733 m| EUR 1 108 m| -34%|
|from operations | | | |
+----------------------+-------------------+------------------+------------+
|Net cash position | EUR 1 584 m| EUR 4 610 m|EUR -3 026 m|
+----------------------+-------------------+------------------+------------+
* Online retail regroups the sales of YNAP as well as the online sales portion of both Watchfinder and the Group's Maisons.
** Prior period comparatives have been re-presented to include royalty income received within total sales.
Chairman's commentary
During the past six months, Richemont strengthened its portfolio with two strategic investments aimed at offering our discerning and globally dispersed clientele more options in how, when and where they engage with and purchase from our Maisons. We now fully own YOOX NET-A-PORTER, the leading online luxury retailer, and Watchfinder, a leading omni-channel platform for premium pre-owned timepieces. As part of the continual assessment of our portfolio, we divested Lancel. These strategic changes have had a material impact on our operating profit and net cash position in the period under review.
Serving our customers is our priority. At the same time, Richemont will ensure that YNAP remains committed to offering brand partners and their clients the best service and we are determined that YNAP remains the neutral, open and compelling go-to destination for online luxury.
More recently, on 26 October 2018, we announced a strategic partnership with Alibaba Group, the preferred online marketplace for Chinese consumers, aiming at becoming a significant and sustainable online destination in luxury shopping for the important Chinese clientele. YNAP and Alibaba will establish a joint venture to bring the in-season offerings of YNAP to Chinese consumers, be it in China or whilst travelling abroad. This new chapter in the history of Richemont reflects the potential we see in China and the confidence we have in Alibaba with whom we share an ambition to set new standards for the future of luxury online, for the benefit of YNAP's brand partners and customers as well as our Maisons and their clients.
Over the six month period ended 30 September 2018, sales increased by 21% at actual rates to EUR 6.81 billion. Excluding YNAP and Watchfinder, collectively the Online Distributors, sales for the period grew by 6% at actual exchange rates and by 8% at constant exchange rates.
Excluding Online Distributors, sales growth was primarily driven by strong performance of the Jewellery Maisons and double digit increases in the Maisons' directly operated boutiques and online stores. Robust retail sales in jewellery and watches more than offset a 2% decline in wholesale sales, which was mainly due to the Specialist Watchmakers' ongoing prudent inventory management and upgrade of the wholesale distribution network. Excluding Online Distributors, all regions with the exception of Middle East and Africa enjoyed higher sales, with notable double digit increases in Hong Kong, Korea and the USA.
In our Jewellery Maisons, watch sales grew strongly in Cartier's stores, benefiting from the successful Panthère and relaunched Santos collections. Jewellery pieces continued to outperform, notably with the iconic Cartier Love and Van Cleef and Arpels Alhambra collections. The muted sales growth of the Specialist Watchmakers reflected the previously mentioned initiatives. Here, retail was strong and overall there was good momentum at Vacheron Constantin, Roger Dubuis and Jaeger-LeCoultre. Most of our Maisons grouped under 'Other' saw higher sales, led primarily by Montblanc and Peter Millar.
The 3% reduction in operating profit to EUR 1.13 billion reflected an increase in costs which more than offset the improvement in gross profit. These higher costs were primarily attributable to the first-time consolidation of Online Distributors and their related acquisition charges as well as disposal-related charges. The operating margin decreased to 16.6%, but improved to 21.1% excluding Online Distributors.
Profit for the period rose to EUR 2.25 billion, primarily due to a post-tax non-cash gain of EUR 1.38 billion on the revaluation of existing YNAP shares. Net cash amounted to EUR 1.58 billion at 30 September 2018 after a EUR 3.75 billion cash outflow related to the YNAP and Watchfinder acquisitions and dividend payment.
Richemont's governance structure continued to evolve with the appointments of Mr Jérôme Lambert to the role of Group Chief Executive Officer and Mr Eric Vallat to the newly created role of Head of Fashion and Accessories Maisons.
Amidst growing volatility in consumer demand, partly attributable to an uncertain economic and geopolitical environment, we maintain confidence in our ability to realise our long term ambitions, supported by the strength of our balance sheet.
Our ambition remains to ensure that we continue to create, manufacture and sell exquisite products with a high level of beauty, craftsmanship, patrimony and passion while maintaining continued engagement, relevance and appeal for our clients.
Johann Rupert
Chairman
Compagnie Financière Richemont SA
Geneva, 9 November 2018
Financial review
The results of newly acquired YNAP and Watchfinder have been included in the Group's financial statements with effect from 1 May and 1 June 2018, respectively. They are grouped under Online Distributors, a newly formed business area. The acquisition and first-time consolidation of Online Distributors has had a material impact on sales, operating profit, cash flow and net cash. Online retail, the newly reported distribution channel, regroups the sales of YNAP as well as the online sales portion of both Watchfinder and the Group's Maisons. Retail now incorporates only sales from the Group's directly operated boutiques.
Sales
In the six month period, sales increased by 21% at actual exchange rates and by 24% at constant exchange rates.
Excluding YNAP and Watchfinder, sales for the period increased by 8% at constant exchange rates, with most regions posting higher sales. This was led by double digit progression in the Americas and in Asia Pacific, the latter benefiting from strong performances in Hong Kong, Korea and Macau. The Group's directly operated boutiques saw double digit growth, both in jewellery and watches. Wholesale sales were 1% higher compared with the prior year period. The wholesale performance reflected the optimisation of external points of sales and the Group's ongoing focus on aligning inventories with end-client demand.
Further details on sales by region, distribution channel and business area are given in the Review of Operations.
Gross profit
Gross profit increased by 16% to EUR 4 256 million. The consolidation of YNAP and Watchfinder has diluted the Group's gross margin to 62.5% versus 65.5% in the prior year period.
Excluding Online Distributors, gross margin progressed to 66.6%. The 110 basis point improvement related in part to manufacturing efficiency gains, a larger share of online and offline retail and, overall, supportive currencies.
Operating profit
The EUR 36 million reduction in operating profit to EUR 1 130 million reflected higher sales and gross profit, but also higher costs, as detailed below. Operating margin was 16.6% compared to 20.7% a year ago. Excluding the consolidation of YNAP and Watchfinder, operating margin for the period improved to 21.1%.
The 24% increase in total operating expenses included EUR 159 million of acquisition and disposal-related charges. These charges can be broken down into EUR 77 million one-time charges, primarily attributable to the disposal of Lancel, and EUR 82 million charges principally related to the amortisation of YNAP and Watchfinder's intangible assets identified on acquisition. Excluding Online Distributors, total operating expenses grew by 8% and, when excluding the above one-time charges, operating expense growth was limited to 4%.
The 10% increase in selling and distribution expenses resulted mainly from the consolidation of Online Distributors. Excluding those businesses, the increase in selling and distribution expenses was limited to 4% compared to the prior year period. Communication expenses rose by 17%, largely explained by the integration of Online Distributors and, to a lesser extent, by communication initiatives by the Jewellery Maisons. Fulfilment expenses of EUR 91 million at the Online Distributors were recorded in the period. Administration costs grew by 34%, again mainly driven by the first-time consolidation of the Online Distributors and, at the Group's Maisons, by expenditure in IT and digital initiatives. Other operating expenses include the previously mentioned acquisitions and disposal-related charges.
Profit for the period
Profit for the period rose by 131% to EUR 2 253 million. The increase reflected the EUR 1 378 million post-tax non-cash accounting gain on the revaluation of existing YNAP shares. Excluding this amount, profit for the period was EUR 875 million, a 10% decline following the previously mentioned acquisition and disposal-related charges. Net finance costs for the period amounted to EUR 47 million, compared to a EUR 72 million net income in the prior year period. Unfavourable foreign exchange movements on monetary items led to a net loss of EUR 38 million, compared to an EUR 84 million net gain in the prior year period. In addition, finance costs in the period included EUR 35 million of interest expense relating to the corporate bond issued in March 2018.
Earnings per share (1 A share/10 B shares) increased by 132% to EUR 3.987 on a diluted basis.
To comply with the South African practice of providing headline earnings per share ('HEPS') data, the relevant figure for headline earnings for the period ended 30 September 2018 would be EUR 932 million (2017: EUR 1 000 million). Basic HEPS for the period was EUR 1.653 (2017: EUR 1.773). Diluted HEPS for the period was EUR 1.649 (2017: EUR 1.767). Further details regarding earnings per share and HEPS, including an itemised reconciliation, may be found in note 11.3 of the Group's condensed consolidated interim financial statements.
Cash flow
Cash flow generated from operating activities amounted to EUR 733 million, a reduction of EUR 375 million compared to the prior year period. This year-on-year decrease reflected a higher absorption of cash for working capital needs, primarily related to higher inventories both at our Maisons and newly acquired businesses.
Net investment in tangible fixed assets during the period amounted to EUR 201 million, predominantly relating to the renovation and relocation of existing boutiques in the Maisons' store network, upgrades of external points of sale with our multi-brand retail partners and the further investment into the Group's central logistics centre in Switzerland. The Group also continued to invest in IT infrastructure, including in YNAP's enterprise platform.
The 2018 dividend of 1.90 per share (1 A share/10 B shares) was paid to shareholders and to South African Depository Receipt holders, net of withholding tax, in September. The 35% withholding tax on all dividends was remitted to the Swiss tax authorities in September. The overall dividend cash outflow in the period amounted to EUR 926 million.
The Group acquired 2.3 million 'A' shares during the six month period 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 related to the hedging programme, leading to a net outflow of EUR 74 million.
Balance sheet
At 30 September 2018, and after the inclusion of Online Distributors, inventories of EUR 6 014 million were EUR 1 071 million higher than at 31 March 2018. Excluding Online Distributors, inventories represented 22 months of cost of sales.
At 30 September 2018, the Group's net cash position amounted to EUR 1 584 million. This position was EUR 3 685 million lower than at 31 March 2018, primarily due to the completion of the YNAP and Watchfinder acquisitions and the annual dividend payment, which altogether resulted in a total cash outflow of EUR 3 751 million. The Group's net cash position includes highly liquid, highly rated money market funds, short-term bank deposits and short-duration bond funds, primarily denominated in Swiss francs, euros and US dollars.
Acquisition of the YOOX NET-A-PORTER GROUP
In March 2018, Richemont launched a voluntary tender offer for all issued and to be issued ordinary shares of YNAP that the Group or its affiliates did not already own. On 10 May 2018, Richemont announced that the offer had become unconditional. During May and June, control of all of the remaining shares was obtained through sell-out and squeeze-out procedures. On 20 June 2018, delisting of YNAP from the Milan Stock Exchange became effective.
As announced on 18 May 2018, Richemont has booked a post-tax non-cash accounting gain of approximately EUR 1.4 billion on its 49% equity-accounted interest in YNAP within 'Share of post-tax results of equity-accounted investments' in its financial statements for the half year ended 30 September 2018. The gain was generated by the differential between the fair value of Richemont's stake immediately before acquisition and the EUR 1.1 billion carrying value at the same date.
The completion of the YNAP acquisition has resulted in recognition of goodwill of EUR 2.9 billion. In addition, intangible assets amounting to EUR 2.4 billion were recognised following provisional completion of the acquisition accounting. The goodwill balance will be subject to annual impairment testing. The intangible assets will be amortised on a straight line basis with useful life from 3 to 20 years, resulting in an annual amortisation charge currently estimated at EUR 180 million.
Review of operations
Sales by region
+----------------+--------------+--------------+---------------------------+
| | | | Change at: |
+----------------+--------------+--------------+------------+--------------+
| | |Six months to |Constant |Actual |
| |Six months to |30 September |exchange |exchange rates|
| |30 September |2017 |rates* | |
|in EUR million |2018 |**re-presented| | |
+----------------+--------------+--------------+------------+--------------+
|Europe | 2 071| 1 637| +28%| +27%|
+----------------+--------------+--------------+------------+--------------+
|Asia Pacific | 2 548| 2 175| +20%| +17%|
+----------------+--------------+--------------+------------+--------------+
|Americas | 1 213| 891| +42%| +36%|
+----------------+--------------+--------------+------------+--------------+
|Japan | 534| 479| +14%| +11%|
+----------------+--------------+--------------+------------+--------------+
|Middle East | 442| 438| +4%| +1%|
|and Africa | | | | |
+----------------+--------------+--------------+------------+--------------+
| | 6 808| 5 620| +24%| +21%|
+----------------+--------------+--------------+------------+--------------+
* Movements at constant exchange rates are calculated by translating underlying sales in local currencies into euros in both the current period and the comparative period at the average exchange rates applicable for the financial year ended 31 March 2018.
** Prior period comparatives have been re-presented to include royalty income received within total sales.
The following comments on Group sales refer to year-on-year movements at constant exchange rates.
Europe
With the first-time consolidation of YNAP and Watchfinder, both having a strong presence in Europe, sales in the region grew by 28%. Europe accounted for 30% of Group sales, compared to 29% a year ago. Excluding Online Distributors, sales in the region increased by 1% over the prior year period, reflecting mixed performances in terms of markets, product lines and channels as well as the disposal of Lancel.
Increasing retail sales more than offset declining wholesale sales, which were impacted by tight management of inventory at the external points of sale of the Group's multi-brand retail partners and optimisation of the wholesale distribution network. Sales in the United Kingdom contracted following a double digit increase in the prior year period while sales in France and Switzerland increased.
Whereas watch sales were broadly in line with the prior year period, jewellery sales enjoyed a double digit increase. Sales development of the other product lines was varied.
Asia Pacific
Sales in Asia Pacific increased by 20% over the period, with the region accounting for the Group's largest sales share at 37% of Group sales.
Excluding YNAP and Watchfinder, the 14% increase in sales was driven by twenty net new store openings, high single digit growth in mainland China and double digit increases in other main markets, notably Hong Kong, Macau and Korea. Both the retail and wholesale channels saw double digit growth, with strong performances in jewellery and watch sales.
Americas
The Americas posted a 42% increase in sales, benefiting from the inclusion of YNAP which has a strong customer base in the region. Excluding Online Distributors, sales grew by 13%, driven by higher sales in all product categories and distribution channels. The growth was led by jewellery, clothing and the retail channel.
The region's contribution to Group sales amounted to 18%, compared to 16% in the prior year period.
Japan
The 14% growth in sales was driven by higher domestic and tourist spending, which benefited from a comparatively weaker yen. Excluding Online Distributors, sales in the region increased by 8%, led by a double digit growth in watch sales and the net opening of five directly operated boutiques.
The country represented 8% of overall sales, in line with prior years.
Middle East and Africa
Middle East and Africa accounted for 7% of Group sales. The inclusion of Online Distributors led to a 4% increase in sales, with strong growth in writing instruments and clothing. Excluding YNAP and Watchfinder, sales in the region declined by 4%, adversely impacted by lower tourist spending, given unfavourable local currencies and geopolitical uncertainties.
Sales by distribution channel
+----------------+--------------+--------------+---------------------------+
| | | | Change at: |
+----------------+--------------+--------------+------------+--------------+
| | |Six months to |Constant |Actual |
| |Six months to |30 September |exchange |exchange rates|
| |30 September |2017 |rates* | |
|in EUR million |2018 |**re-presented| | |
+----------------+--------------+--------------+------------+--------------+
|Retail | 3 557| 3 229| +13%| +10%|
+----------------+--------------+--------------+------------+--------------+
|Online retail | 959| 64| -| -|
+----------------+--------------+--------------+------------+--------------+
|Wholesale | 2 292| 2 327| +1%| -2%|
+----------------+--------------+--------------+------------+--------------+
| | 6 808| 5 620| +24%| +21%|
+----------------+--------------+--------------+------------+--------------+
* Movements at constant exchange rates are calculated by translating underlying sales in local currencies into euros in both the current period and the comparative period at the average exchange rates applicable for the financial year ended 31 March 2018.
** Prior period comparatives have been re-presented to include royalty income received within total sales and to consistently show online retail.
The following comments on Group sales refer to year-on-year movements at constant exchange rates unless otherwise stated.
Retail
Retail sales increased by 13%, with growth in all regions, and double digit increases in Asia Pacific, the Americas and Middle East and Africa. Growth was particularly strong at the Jewellery Maisons and the Specialist Watchmakers. Retail sales benefited from the internalisation of external points of sales in the Middle East in late calendar year 2017. The number of Maisons' directly operated boutiques was reduced by 33 to 1 090, mostly in relation to the disposal of Lancel.
The Maisons' directly operated boutiques contributed 52% of Group sales, compared to 57% in the prior year period. The reduced contribution reflected the presentation of a new distribution channel, online retail, as detailed below.
Online retail
This newly reported distribution channel regroups the sales of YNAP (from May 2018 onwards) as well as the online sales portion of both Watchfinder (from June 2018 onwards) and the Group's Maisons. Online retail accounted for 14% of Group sales.
Wholesale
With the first-time consolidation of the newly acquired businesses, the contribution of the Group's wholesale business, which includes sales to franchise partners and multi-brand retail partners, stood at a third of Group sales, compared to 41% a year ago.
Overall, wholesale sales were 1% above the prior year period, as growth in Asia Pacific, Japan and the Americas offset declines in other regions. An ongoing focus on aligning sell-in with sell-out and continued qualitative improvements in the watch wholesale network weighed on the Group's wholesale business. The Jewellery Maisons, Montblanc and the Fashion and Accessories Maisons saw higher wholesale sales in contrast to the Specialist Watchmakers.
Sales and operating results by business area
Jewellery Maisons
+-------------------+------------------+------------------+--------+
| | |Six months to | |
| |Six months to |30 September 2017 | |
|in EUR million |30 September 2018 |**re-presented |Change |
+-------------------+------------------+------------------+--------+
|Sales | 3 454| 3 164| +9%|
+-------------------+------------------+------------------+--------+
|Operating results | 1 167| 981| +19%|
+-------------------+------------------+------------------+--------+
|Operating margin | 33.8%| 31.0%|+280 bps|
+-------------------+------------------+------------------+--------+
At actual exchange rates, the 9% sales increase at Cartier and Van Cleef and Arpels was driven by double digit growth in jewellery and high single digit growth in watches. Momentum at Cartier was sustained by jewellery and the Panthère and relaunched Santos watch collections and, at Van Cleef and Arpels, by the Alhambra collection's 50th anniversary launches. Performances in Asia Pacific, the Americas and at the Jewellery Maisons' directly operated boutiques were particularly strong.
Operating results improved by 19% compared to the prior year period, primarily as a result of higher sales and manufacturing efficiency gains. Investments into Jewellery Maisons continued, notably in communication at Cartier for the relaunch of the Santos watch collection and at Van Cleef and Arpels to celebrate Alhambra's anniversary. Operating margin gained 280 basis points to 33.8%.
Specialist Watchmakers
+-------------------+------------------+------------------+-------+
| | |Six months to | |
| |Six months to |30 September 2017 | |
|in EUR million |30 September 2018 |**re-presented |Change |
+-------------------+------------------+------------------+-------+
|Sales | 1 550| 1 527| +2%|
+-------------------+------------------+------------------+-------+
|Operating results | 286| 294| -3%|
+-------------------+------------------+------------------+-------+
|Operating margin | 18.5%| 19.3%|-80 bps|
+-------------------+------------------+------------------+-------+
The Specialist Watchmakers' sales were 2% higher than in the prior year period. Double digit growth in directly operated boutiques more than offset lower wholesale sales, which were impacted by ongoing control of sell-in and distribution optimisation initiatives. Performance was varied across Maisons and regions, with good momentum at Vacheron Constantin, Roger Dubuis and Jaeger-LeCoultre and, regionally, in Asia Pacific.
Stock provisions, linked to the physical returns of inventory buy-backs, led to a 3% reduction in the operating result to EUR 286 million, notwithstanding a larger share of retail and tight cost control. Consequently, the operating margin for the period was down 80 basis points to 18.5%.
Online Distributors
+-------------------+------------------+------------------+---------+
| |Six months to |Six months to | |
|in EUR million |30 September 2018 |30 September 2017 |Change |
+-------------------+------------------+------------------+---------+
|Sales | 893| -| n/a|
+-------------------+------------------+------------------+---------+
|Operating results | (115)| -| n/a|
+-------------------+------------------+------------------+---------+
|Operating margin | (12.9)%| -| n/a|
+-------------------+------------------+------------------+---------+
Sales of Richemont Maisons' own products made by YNAP are reported under both the Maisons and YNAP for business area reporting. In Group sales, these are eliminated as Intersegment sales. Sales for YNAP and for Watchfinder related to the period from 1 May and 1 June 2018, respectively.
Online Distributors recorded a EUR 115 million loss, mostly related to the amortisation of intangible assets recognised on acquisitions.
Other
+-------------------+------------------+------------------+---------+
| | |Six months to | |
| |Six months to |30 September 2017 | |
|in EUR million |30 September 2018 |**re-presented |Change |
+-------------------+------------------+------------------+---------+
|Sales | 935| 929| +1%|
+-------------------+------------------+------------------+---------+
|Operating results | (46)| 6| n/a|
+-------------------+------------------+------------------+---------+
|Operating margin | (4.9)%| 0.6%| -550 bps|
+-------------------+------------------+------------------+---------+
'Other' includes Montblanc, the Group's Fashion & Accessories businesses, its watch component manufacturing and real estate activities.
Richemont's other businesses reported a 1% sales growth, partly impacted by the disposals of Lancel (June 2018) and Shanghai Tang (July 2017). Excluding the impact of such disposals, sales increased by a mid-single digit rate. Almost all Maisons enjoyed growth, regionally driven by Europe and the Americas.
The EUR 46 million operating losses included the above mentioned one-time charges related to the disposal of Lancel.
Corporate costs
+-------------------------+--------------+--------------+-------+
| |Six months to |Six months to | |
| |30 September |30 September | |
|in EUR million |2018 |2017 |Change |
+-------------------------+--------------+--------------+-------+
|Corporate costs | (156)| (115)| +36%|
+-------------------------+--------------+--------------+-------+
| | | | |
+-------------------------+--------------+--------------+-------+
|Central support services | (113)| (102)| +11%|
+-------------------------+--------------+--------------+-------+
|Other operating | (43)| (13)| |
|income/(expense), 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 that are not allocated to specific segments. They were stable at circa 2% of Group sales on a year-on-year basis.
The Group's consolidated financial statements of comprehensive income, cash flows and financial position are presented in Appendix 1. Richemont's unaudited consolidated financial statements for the half year are available on the Group's website at www.richemont.com/investor-relations/reports.
Jérôme Lambert Burkhart Grund
Chief Executive Officer Chief Finance Officer
Compagnie Financière Richemont SA
Geneva, 9 November 2018
Appendix 1
Condensed consolidated statement of comprehensive income
+------------------------------+-----------------+------------------+
| |Six months to |Six months to |
| |30 September 2018|30 September 2017 |
| | |*re-presented |
+------------------------------+-----------------+------------------+
| | EURm| EURm |
+------------------------------+-----------------+------------------+
|Revenue | 6 808| 5 620|
+------------------------------+-----------------+------------------+
|Cost of sales | (2 552)| (1 940)|
+------------------------------+-----------------+------------------+
| | | |
+------------------------------+-----------------+------------------+
|Gross profit | 4 256| 3 680|
+------------------------------+-----------------+------------------+
|Selling and | (1 634)| (1 490)|
|distribution expenses | | |
+------------------------------+-----------------+------------------+
|Communication expenses | (567)| (484)|
+------------------------------+-----------------+------------------+
|Fulfilment expenses | (91)| –|
+------------------------------+-----------------+------------------+
|Administrative expenses | (671)| (502)|
+------------------------------+-----------------+------------------+
|Other operating expense | (163)| (38)|
+------------------------------+-----------------+------------------+
| | | |
+------------------------------+-----------------+------------------+
|Operating profit | 1 130| 1 166|
+------------------------------+-----------------+------------------+
|Finance costs | (123)| (53)|
+------------------------------+-----------------+------------------+
|Finance income | 76| 125|
+------------------------------+-----------------+------------------+
|Share of post-tax results | 1 408| (16)|
|of equity-accounted | | |
|investments | | |
+------------------------------+-----------------+------------------+
| | | |
+------------------------------+-----------------+------------------+
|Profit before taxation | 2 491| 1 222|
+------------------------------+-----------------+------------------+
|Taxation | (238)| (248)|
+------------------------------+-----------------+------------------+
| | | |
+------------------------------+-----------------+------------------+
|Profit for the period | 2 253| 974|
+------------------------------+-----------------+------------------+
|Other comprehensive income: | | |
+------------------------------+-----------------+------------------+
|Items that will never be | | |
|reclassified to profit or loss| | |
+------------------------------+-----------------+------------------+
|Defined benefit plan | -| 27|
|actuarial gains/(losses) | | |
+------------------------------+-----------------+------------------+
|Tax on defined benefit | -| (5)|
|plan actuarial gains/(losses) | | |
+------------------------------+-----------------+------------------+
|Fair value changes on | (51)| -|
|financial assets held at | | |
|fair value through other | | |
|comprehensive income | | |
+------------------------------+-----------------+------------------+
| | (51)| 22|
+------------------------------+-----------------+------------------+
|Items that are or may be | | |
|reclassified subsequently to | | |
|profit or loss | | |
+------------------------------+-----------------+------------------+
|Currency translation | | |
|adjustments | | |
+------------------------------+-----------------+------------------+
|-movement in the period | 387| (858)|
+------------------------------+-----------------+------------------+
|–reclassification to profit | 3| –|
|or loss | | |
+------------------------------+-----------------+------------------+
|Reclassification of cash flow | 2| –|
|hedges to profit or loss | | |
+------------------------------+-----------------+------------------+
|Share of other comprehensive | 1| (5)|
|income of | | |
|equity-accounted investments | | |
+------------------------------+-----------------+------------------+
| | 393| (863)|
+------------------------------+-----------------+------------------+
|Other comprehensive loss, | 342| (841)|
|net of tax | | |
+------------------------------+-----------------+------------------+
| | | |
+------------------------------+-----------------+------------------+
|Total comprehensive income | 2 595| 133|
+------------------------------+-----------------+------------------+
| | | |
+------------------------------+-----------------+------------------+
|Profit attributable to: | | |
+------------------------------+-----------------+------------------+
|Owners of the parent company | 2 253| 974|
+------------------------------+-----------------+------------------+
|Non-controlling interests | –| –|
+------------------------------+-----------------+------------------+
| | 2 253| 974|
+------------------------------+-----------------+------------------+
|Total comprehensive income | | |
|attributable to: | | |
+------------------------------+-----------------+------------------+
|Owners of the parent company | 2 595| 133|
+------------------------------+-----------------+------------------+
|Non-controlling interests | –| –|
+------------------------------+-----------------+------------------+
| | 2 595| 133|
+------------------------------+-----------------+------------------+
|Earnings per A share/ 10 B | | |
|shares attributable to owners | | |
|of the parent company during | | |
|the period (expressed in | | |
|EUR per share) | | |
+------------------------------+-----------------+------------------+
|Basic | 3.996| 1.727|
+------------------------------+-----------------+------------------+
|Diluted | 3.987| 1.721|
+------------------------------+-----------------+------------------+
*Prior period comparatives have been re-presented to include royalty income received within total revenue (previously presented within other income/(expenses))
Condensed consolidated statement of cash flow
+-------------------------------+-----------------+------------------+
| |Six months to |Six months to |
| |30 September 2018|30 September 2017 |
+-------------------------------+-----------------+------------------+
| | EURm| EURm|
+-------------------------------+-----------------+------------------+
|Operating profit | 1 130| 1 166|
+-------------------------------+-----------------+------------------+
|Depreciation of property, | 234| 225|
|plant and equipment | | |
+-------------------------------+-----------------+------------------+
|Amortisation of other | 150| 40|
|intangible assets | | |
+-------------------------------+-----------------+------------------+
|Depreciation of investment | 2| -|
|property | | |
+-------------------------------+-----------------+------------------+
|Loss on disposal of | 2| -|
|property, plant and equipment | | |
+-------------------------------+-----------------+------------------+
|(Profit)/loss on disposal | (2)| 1|
|of intangible assets | | |
+-------------------------------+-----------------+------------------+
|(Decrease)/increase in | (2)| 3|
|long-term provisions | | |
+-------------------------------+-----------------+------------------+
|Increase in | -| 1|
|retirement benefit obligations | | |
+-------------------------------+-----------------+------------------+
|Non-cash items | 56| 32|
+-------------------------------+-----------------+------------------+
|(Increase)/decrease | (195)| 110|
|in inventories | | |
+-------------------------------+-----------------+------------------+
|Increase | (181)| (244)|
|in trade receivables | | |
+-------------------------------+-----------------+------------------+
|Decrease/(increase) in other | 12| (42)|
|receivables | | |
+-------------------------------+-----------------+------------------+
|Decrease in current liabilities| (428)| (174)|
+-------------------------------+-----------------+------------------+
|Increase/(decrease) in | 20| (2)|
|long-term liabilities | | |
+-------------------------------+-----------------+------------------+
|Cash outflow on derivative | (65)| (8)|
|financial instruments | | |
+-------------------------------+-----------------+------------------+
| | | |
+-------------------------------+-----------------+------------------+
|Cash flow generated | 733| 1 108|
|from operations | | |
+-------------------------------+-----------------+------------------+
|Interest received | 43| 36|
+-------------------------------+-----------------+------------------+
|Interest paid | (43)| (27)|
+-------------------------------+-----------------+------------------+
|Dividends received from | 36| 2|
|equity-accounted investments | | |
+-------------------------------+-----------------+------------------+
|Dividends received from | 13| -|
|other investments | | |
+-------------------------------+-----------------+------------------+
|Taxation paid | (135)| (159)|
+-------------------------------+-----------------+------------------+
| | | |
+-------------------------------+-----------------+------------------+
|Net cash generated | 647| 960|
|from operating activities | | |
+-------------------------------+-----------------+------------------+
| | | |
+-------------------------------+-----------------+------------------+
|Cash flows from | | |
|investing activities | | |
+-------------------------------+-----------------+------------------+
|Acquisition of | (2 643)| (45)|
|subsidiary undertakings and | | |
|other businesses, | | |
|net of cash acquired | | |
+-------------------------------+-----------------+------------------+
|Disposal of | (44)| (14)|
|subsidiary undertakings, | | |
|net of cash disposed of | | |
+-------------------------------+-----------------+------------------+
|Acquisition of | -| (63)|
|equity-accounted investments | | |
+-------------------------------+-----------------+------------------+
|Proceeds from disposal of, | 21| 17|
|and capital distributions from,| | |
|equity-accounted investments | | |
+-------------------------------+-----------------+------------------+
|Acquisition of property, | (212)| (139)|
|plant and equipment | | |
+-------------------------------+-----------------+------------------+
|Proceeds from disposal of | 11| 3|
|property, plant and equipment | | |
+-------------------------------+-----------------+------------------+
|Acquisition of | (67)| (22)|
|intangible assets | | |
+-------------------------------+-----------------+------------------+
|Proceeds from disposal of | 4| 1|
|intangible assets | | |
+-------------------------------+-----------------+------------------+
|Acquisition of | (62)| (31)|
|investment property | | |
+-------------------------------+-----------------+------------------+
|Investment in money market and | (3 484)| (2 669)|
|externally managed funds | | |
+-------------------------------+-----------------+------------------+
|Proceeds from disposal | 4 518| 2 682|
|of money market and | | |
|externally managed funds | | |
+-------------------------------+-----------------+------------------+
|Acquisition of other | (25)| (601)|
|non-current assets | | |
|and investments | | |
+-------------------------------+-----------------+------------------+
|Proceeds from disposal of | 12| 3|
|other non-current assets | | |
|and investments | | |
+-------------------------------+-----------------+------------------+
| | | |
+-------------------------------+-----------------+------------------+
|Net cash used | (1 971)| (878)|
|in investing activities | | |
+-------------------------------+-----------------+------------------+
| | | |
+-------------------------------+-----------------+------------------+
|Cash flows from | | |
|financing activities | | |
+-------------------------------+-----------------+------------------+
|Proceeds from borrowings | 56| 51|
+-------------------------------+-----------------+------------------+
|Repayment of borrowings | (46)| (79)|
+-------------------------------+-----------------+------------------+
|Dividends paid | (926)| (918)|
+-------------------------------+-----------------+------------------+
|Payment for treasury shares | (180)| (141)|
+-------------------------------+-----------------+------------------+
|Proceeds from sale | 106| 69|
|of treasury shares | | |
+-------------------------------+-----------------+------------------+
|Contribution received from | 57| -|
|non-controlling interests | | |
+-------------------------------+-----------------+------------------+
|Acquisition of non-controlling | (195)| -|
|interests in a subsidiary | | |
+-------------------------------+-----------------+------------------+
|Capital element of | (3)| (1)|
|finance lease payments | | |
+-------------------------------+-----------------+------------------+
| | | |
+-------------------------------+-----------------+------------------+
|Net cash used | (1 131)| (1 019)|
|in financing activities | | |
+-------------------------------+-----------------+------------------+
| | | |
+-------------------------------+-----------------+------------------+
|Net change in cash | (2 455)| (937)|
|and cash equivalents | | |
+-------------------------------+-----------------+------------------+
|Cash and cash equivalents at | 4 504| 2 765|
|the beginning of the period | | |
+-------------------------------+-----------------+------------------+
|Exchange losses on cash | 52| (190)|
|and cash equivalents | | |
+-------------------------------+-----------------+------------------+
| | | |
+-------------------------------+-----------------+------------------+
|Cash and cash equivalents at | 2 101| 1 638|
|the end of the period | | |
+-------------------------------+-----------------+------------------+
Condensed consolidated balance sheet
+-------------------------------------+-----------------+-------------+
| |30 September 2018|31 March 2017|
| | |*re-presented|
| | EURm| EURm|
+-------------------------------------+-----------------+-------------+
|Assets | | |
+-------------------------------------+-----------------+-------------+
|Non-current assets | | |
+-------------------------------------+-----------------+-------------+
|Property, plant and equipment | 2 506| 2 325|
+-------------------------------------+-----------------+-------------+
|Goodwill | 3 344| 297|
+-------------------------------------+-----------------+-------------+
|Other intangible assets | 2 776| 370|
+-------------------------------------+-----------------+-------------+
|Investment property | 283| 222|
+-------------------------------------+-----------------+-------------+
|Equity-accounted investments | 178| 1 308|
+-------------------------------------+-----------------+-------------+
|Deferred income tax assets | 581| 604|
+-------------------------------------+-----------------+-------------+
|Financial assets held at fair | 10| 447|
|value through profit or loss | | |
+-------------------------------------+-----------------+-------------+
|Financial assets held at fair | 394| -|
|value through other comprehensive | | |
|income | | |
+-------------------------------------+-----------------+-------------+
|Other non-current assets | 431| 401|
+-------------------------------------+-----------------+-------------+
| | 10 503| 5 974|
+-------------------------------------+-----------------+-------------+
| | | |
+-------------------------------------+-----------------+-------------+
|Current assets | | |
+-------------------------------------+-----------------+-------------+
|Inventories | 6 014| 4 943|
+-------------------------------------+-----------------+-------------+
|Trade and other receivables | 1 558| 1 240|
+-------------------------------------+-----------------+-------------+
|Derivative financial instruments | 41| 18|
+-------------------------------------+-----------------+-------------+
|Financial assets held at fair | 4 133| 5 057|
|value through profit or loss | | |
+-------------------------------------+-----------------+-------------+
|Assets held for sale | – | 19|
+-------------------------------------+-----------------+-------------+
|Cash at bank and on hand | 6 535| 8 401|
+-------------------------------------+-----------------+-------------+
| | 18 281| 19 678|
+-------------------------------------+-----------------+-------------+
| | | |
+-------------------------------------+-----------------+-------------+
|Total assets | 28 784| 25 652|
+-------------------------------------+-----------------+-------------+
| | | |
+-------------------------------------+-----------------+-------------+
|Equity and liabilities | | |
+-------------------------------------+-----------------+-------------+
|Equity attributable to owners | | |
|of the parent company | | |
+-------------------------------------+-----------------+-------------+
|Share capital | 334| 334|
+-------------------------------------+-----------------+-------------+
|Treasury shares | (560)| (520)|
+-------------------------------------+-----------------+-------------+
|Hedge and share option reserve | 310| 302|
+-------------------------------------+-----------------+-------------+
|Cumulative translation | 2 283| 1 892|
|adjustment reserve | | |
+-------------------------------------+-----------------+-------------+
|Retained earnings | 13 764| 12 623|
+-------------------------------------+-----------------+-------------+
| | 16 131| 14 631|
+-------------------------------------+-----------------+-------------+
|Non-controlling interests | 86| 7|
+-------------------------------------+-----------------+-------------+
|Total equity | 16 217| 14 638|
+-------------------------------------+-----------------+-------------+
| | | |
+-------------------------------------+-----------------+-------------+
|Liabilities | | |
+-------------------------------------+-----------------+-------------+
|Non-current liabilities | | |
+-------------------------------------+-----------------+-------------+
|Borrowings | 4 440| 4 288|
+-------------------------------------+-----------------+-------------+
|Deferred income tax liabilities | 358| 8|
+-------------------------------------+-----------------+-------------+
|Employee benefits obligations | 69| 68|
+-------------------------------------+-----------------+-------------+
|Provisions | 52| 73|
+-------------------------------------+-----------------+-------------+
|Other long-term financial liabilities| 211| 168|
+-------------------------------------+-----------------+-------------+
| | 5 130| 4 605|
+-------------------------------------+-----------------+-------------+
|Current liabilities | | |
+-------------------------------------+-----------------+-------------+
|Trade and other payables | 1 989| 1 634|
+-------------------------------------+-----------------+-------------+
|Current income tax liabilities | 494| 359|
+-------------------------------------+-----------------+-------------+
|Borrowings | 209| 4|
+-------------------------------------+-----------------+-------------+
|Derivative financial instruments | 28| 90|
+-------------------------------------+-----------------+-------------+
|Provisions | 282| 406|
+-------------------------------------+-----------------+-------------+
|Liabilities of disposal | -| 19|
|groups held for sale | | |
+-------------------------------------+-----------------+-------------+
|Bank overdrafts | 4 435| 3 897|
+-------------------------------------+-----------------+-------------+
| | 7 437| 6 409|
+-------------------------------------+-----------------+-------------+
|Total liabilities | 12 567| 11 014|
+-------------------------------------+-----------------+-------------+
|Total equity and liabilities | 28 784| 25 652|
+-------------------------------------+-----------------+-------------+
| | | |
+-------------------------------------+-----------------+-------------+
*Prior year comparatives have been re-presented to include prepayments within Trade and other receivables (previously disclosed separately) and for certain reclassifications required following the adoption of IFRS 15 Revenue from contracts with customers. For further details, see note 2 to the interim financial statements.
Presentation
The results will be presented via a live audio webcast on 9 November 2018, starting at 09:30 (CET). The direct link is available from 07:00 (CET) at: www.richemont.com. The presentation may be viewed using a mobile device or from a browser.
* Live telephone connection: call one of these numbers 10 minutes before the start of the presentation:
* Europe +41 58 310 50 00
* USA +1 631 570 5613
* UK +44 207 107 0613
* South Africa +27 11 589 8373 / 0800 992 635 (toll free)
* An archive of the audio webcast will be available at 15:00 (CET) the same day from:
* www.richemont.com/investor-relations/results-presentations
* A transcript of the audio webcast will be available on 13 November from:
* www.richemont.com/investor-relations/results-presentations
Statutory information
The Richemont 2018 Interim Report will be available for download from the Group's website from 17 November 2018 at www.richemont.com/investor-relations/reports.
Registered office Registrar Auditor
50 chemin de la Chênaie Computershare Schweiz AG PricewaterhouseCoopers SA
CP 30, 1293 Bellevue P.O. Box, 4601 Olten 50 avenue Giuseppe-Motta
Geneva Switzerland 1202 Geneva
Switzerland Tel: +41 62 205 7700 Switzerland
Tel: +41 22 721 3500 E-mail: share.register@computershare.com
Internet : www.richemont.com
Secretariat contact Investor and Media contact
Swen Grundmann Sophie Cagnard
Company Secretary Group Corporate Communications Director
Tel: +41 22 721 3500
E-mail: secretariat@cfrinfo.net James Fraser
Investor Relations Executive
Tel: +41 22 721 3003 (investor relations)
E-mail: investor.relations@cfrinfo.net
Tel: +41 22 721 3507 (press enquiries)
E-mail: pressoffice@cfrinfo.net
'A' shares issued by Compagnie Financière Richemont SA are listed and traded on SIX Swiss Exchange, the Company's primary listing, (Reuters 'CFR.VX'/Bloomberg 'CFR:VX'/ISIN CH0210483332) and are included in the Swiss Market Index ('SMI') of leading stocks. The Swiss 'Valorennummer' is 21048333. Richemont's 'A' shares are registered. The share register is managed by Computershare Schweiz AG, the registrar.
South African depository receipts in respect of Richemont 'A' shares are traded on the Johannesburg stock exchange operated by JSE Limited, the Company's secondary listing, (Reuters 'CFRJ.J'/Bloomberg 'CFR:SJ'/ISIN CH0045159024).
The closing price of the Richemont 'A' share on 28 September 2018 was CHF 80.00 and the market capitalisation of the Group's 'A' shares on that date was CHF 40 512 million. Over the preceding six-month period, the highest closing price of the 'A' share was CHF 99.02 (17 May) and the lowest closing price was CHF 78.82 (19 September).
About Richemont
Richemont owns a portfolio of leading international 'Maisons' which are recognised for their distinctive heritage, craftsmanship and creativity. The Group operates in four business areas: Jewellery Maisons, being Cartier and Van Cleef and Arpels; Specialist Watchmakers, being A. Lange and Söhne, Baume and Mercier, IWC Schaffhausen, Jaeger-LeCoultre, Officine Panerai, Piaget, Roger Dubuis and Vacheron Constantin; Online Distributors, being YOOX NET-A-PORTER GROUP and Watchfinder.co.uk; Other, including Alfred Dunhill, Azzedine Alaïa, Chloé, Montblanc and Peter Millar.
Disclaimer
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. Richemont's forward-looking statements are based on management's current expectations and assumptions regarding the Company's business and performance, the economy and other future conditions and forecasts of future events, circumstances and results.
As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. 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.
© Richemont 2018
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 six-month period ended 30 September 2018 was 15.704; this compares with a rate of 14.999 during the comparative period.
in ZAR millions 30 September 2018 30 September 2017
*re-presented
Revenue 106 913 84 294 +27%
Operating profit 17 746 17 489 +1%
Profit for the period 35 381 14 609 +142%
Profit attributable to:
Owners of the parent company 35 381 14 609
Non-controlling interest - -
35 381 14 609
Earnings per depository receipt - diluted basis ZAR 6.2612 ZAR 2.5813 +143%
Headline earnings per depository receipt - diluted basis ZAR 2.5896 ZAR 2.6503 -2%
*Prior year comparatives have been re-presented to include royalty income received within total revenue.
Headline earnings per depository receipt exclude the impact of gains amounting to ZAR 20 745 million (EUR 1 321 million). In the comparative period, headline earnings per depository receipt excluded the impact of losses amounting to ZAR 390 million (EUR 26 million). Further details of these losses, which conform to the JSE listing requirements, are presented in note 11.3 of the unaudited interim consolidated financial statements.
Richemont Securities SA Depository Receipts are issued subject to the terms of the Deposit Agreement entered into on 18 December 1992, most recently amended on 26 March 2014. 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 SA or Computershare Investor Services (Proprietary) Limited.
Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 09/11/2018 08:00:00 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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