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RCH
RCH
RCH - Richmont Securities AG - Results For The Year Ended 31 March 2007
RICHMONT SECURITIES AG
Sharecode: RCH
ISIN: CH0013157380
RESULTS FOR THE YEAR ENDED 31 MARCH 2007
Richemont, the Swiss luxury goods group, announces its audited results for the
year ended 31 March 2007.
Financial highlights
- Sales increased by 12 per cent to EUR 4 827 million.
- Operating profit from the luxury goods businesses increased by 24 per cent
to EUR 916 million.
- Excluding non-recurring items, operating profit increased by 26 per cent to
EUR 900 million.
- Net profit, including the Group`s share of the results of British American
Tobacco, increased by 21 per cent to EUR 1 329 million. Excluding the
impact of non-recurring items in both years, net profit attributable to
unitholders increased by 21 per cent to EUR 1 350 million.
- Cash generated by the Group`s luxury goods operations was EUR 970 million.
- The overall dividend for the year, at EUR 1.25 per unit, represents an
increase of 14 per cent.
Sales
The 12 per cent sales increase represented a continuation of the trend
established in recent years, with good growth at most Maisons.
Operating profit
The increase in sales generated a 24 per cent increase in operating profit to
EUR 916 million. The operating margin for the year was 19 per cent, two
percentage points higher than the comparative year.
British American Tobacco (`BAT`)
The Group`s share of the results of BAT increased 11 per cent to EUR 539
million. The Group`s effective interest in BAT at 31 March 2007 was 19 per
cent. Cash dividends received from BAT during the year amounted to EUR 280
million.
Net profit
Net profit, including the Group`s share of the results of British American
Tobacco, increased by 21 per cent to EUR 1 329 million. Earnings per unit on a
diluted basis increased by 19 per cent to EUR 2.331 per unit.
Cash position
The Group`s net cash position at 31 March 2007 was EUR 1 141 million. During
the year, Group net cash increased by EUR 257 million, reflecting strong cash
generation by the Group`s luxury business of EUR 970 million, the dividends
received from BAT and the payment to unitholders of ordinary and special
dividends amounting to EUR 612 million.
Dividend
In addition to the 8 per cent increase in the level of ordinary dividend to
EUR 0.65 per unit, a special dividend of EUR 0.60 per unit will also be paid to
unitholders in September 2007. The dividend for the year will therefore
amount to EUR 1.25 per unit.
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. In addition to
its luxury goods interests, Richemont also holds a significant investment in
British American Tobacco - one of the world`s leading tobacco groups.
www.richemont.com
Group results
in EUR millions March 2007 March 2006
Sales 4 827 4 308 + 12%
Cost of sales (1 753) (1 588)
Gross profit 3 074 2 720 + 13%
Net operating expenses (2 158) (1 979) +9%
Operating profit 916 741 + 24%
Net financial income 31 5
Profit before taxation 947 746
Taxation (158) (136)
Net profit - parent and subsidiaries 789 610 + 29%
Share of post-tax profit of associates 540 486 + 11%
Net profit 1 329 1 096 + 21%
Analysed as follows
Net profit attributable to unitholders 1 328 1 094
Net profit attributable to minority
interests 1 2
1 329 1 096
Earnings per unit - diluted basis EUR 2.331 EUR 1.951 + 19%
Dividends
Ordinary dividend per unit EUR 0.65 EUR 0.60 +8%
Special dividend per unit EUR 0.60 EUR 0.50 + 20%
Total dividend per unit EUR 1.25 EUR 1.10 + 14%
Operating profit in both years included non-recurring items of a
non-operational nature. During the year under review, the impact on operating
profit was a gain of EUR 16 million (2006: gain of EUR 28 million).
The Group`s share of the results of its principal associate, British American
Tobacco, also includes non-recurring items reported by that entity.
Including the Group`s share of results from associates, the overall impact of
these non-recurring items, after taxation and minority interests, on net profit
was a loss of EUR 22 million (2006: EUR 18 million). Excluding non-recurring
items, net profit attributable to unitholders increased by 21 per cent to
EUR 1 350 million from EUR 1 112 million in the prior year.
An analysis of the effect of non-recurring items is set out later in this
document.
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
Richemont has again enjoyed a year of substantial growth in both sales and
profitability. Supported by a generally positive economic background in most of
the major markets in which the Group`s luxury goods businesses operate, sales
increased by 12 per cent to EUR 4 827 million and operating profit grew by 24
per cent to reach EUR 916 million.
Net profit for the year was EUR 1 329 million, reflecting the good results of
the luxury businesses as well as the strong performance of the Group`s tobacco
interests. The investment in British American Tobacco contributed EUR 539
million to net profit for the year.
Dividends
Given the excellent performance of the luxury businesses this year, your Board
has recommended an increase of 8 per cent in the regular dividend, bringing it
to EUR 0.65 per unit.
Over the last two years, Richemont has paid over EUR 555 million in special
dividends, largely out of the proceeds of the disposal of the final tranche of
BAT redeemable preference shares received in 1999 upon the merger of Rothmans
International and BAT. In the light of the strong cash flow from the BAT
interest and BAT`s stated policy of increasing its own dividends, your Board
has decided that it would be in order this year to increase the special
dividend to EUR 0.60 per Richemont unit.
In total, therefore, the dividend to be paid following approval at the Annual
General Meeting this September will amount to EUR 1.25 per Richemont unit.
Current trading and outlook for the year ahead I mentioned in the interim
report that I was concerned about the capacity of our supply chain to meet the
demand for certain watch models. This continues to be the case but I am
confident that solutions will be found. We will work closely with our partners
in the Swiss watch industry and continue to invest in the development of the
Group`s own manufacturing capacity.
Although the weakness of the yen and the dollar - two key currencies for the
Group - is a continuing issue, the outlook is nonetheless broadly positive for
Richemont`s luxury businesses. We currently expect to see good underlying
growth in sales in most key markets over the coming year. Our expectations are
supported by the positive trends seen during the latter half of the past year
and the continued good performance in April 2007, when sales increased by 10
per cent at actual exchange rates.
Over the last 5 years, Richemont unitholders have enjoyed an average rate of
return of 17 per cent per annum, taking into account both dividends and capital
appreciation. That is a strong performance.
The global market for luxury goods is expanding. Our businesses are extending
their reach into new markets and understand that they have to produce exciting
and innovative products, combined with excellent service, to meet the demands
of an ever more discerning clientele. Equally, from a corporate perspective, we
must continually evaluate the appropriateness of our structures to meet the
needs of the business and to ensure that the Group is optimally positioned to
achieve our objective of continuing to grow the value of unitholders`
investments over the long-term.
As ever, there are uncertainties and challenges to be faced but we look forward
with a degree of confidence to the year ahead.
Johann Rupert
Executive Chairman
Compagnie Financiere Richemont SA
Geneva, 24 May 2007
Business Review
in EUR millions March 2007 March 2006
Sales 4 827 4 308 + 12%
Cost of sales (1 753) (1 588)
Gross profit 3 074 2 720 + 13%
Net operating expenses (2 158) (1 979) +9%
Selling and distribution expenses (1 090) (1 000) +9%
Communication expenses (570) (503) + 13%
Administration expenses (503) (509) -1%
Other operating income 5 33 - 85%
Operating profit 916 741 + 24%
Further analysed as follows:
Underlying operating profit from
luxury business 900 713 + 26%
Non-recurring items included in `Other
operating income` 16 28 - 43%
Operating profit 916 741 + 24%
Sales in the year increased by 12 per cent to EUR 4 827 million, with strong
growth in all product areas and in all regions.
The gross margin percentage increased by 0.6 percentage points to 63.7 per
cent, reflecting changes in both the product mix and the channels through which
they are distributed, as well as higher utilisation rates in manufacturing.
Sales growth and the improved margin percentage generated a 13 per cent
increase in gross profit to EUR 3 074 million.
Net operating expenses increased by 9 per cent, reflecting increases in selling
and distribution expenses and communication costs. The 13 per cent increase in
communication costs included centenary events, marketing efforts in developing
markets and the costs associated with new product launches for certain
products. As a percentage of sales, communication costs were broadly in line
with the prior year at 11.8 per cent. Administration expenses, which include
head office costs of the Maisons, regional platform expenses and the Group`s
central support services, decreased by 1 per cent in the year. Administration
expenses within the operating businesses rose by 7 per cent, whereas regional
platform expenses increased by only 2 per cent. The Group`s central support
costs decreased by 11 per cent overall, largely reflecting one-off charges in
the prior year. Net operating expenses included stock option charges amounting
to EUR 33 million (2006: EUR 36 million).
Other operating income for the year under review included a net, non-recurring
gain of EUR 16 million in respect of a property disposal attributable to Alfred
Dunhill. In the prior year, other operating income included net non-recurring
gains amounting to EUR 28 million. Net prior year gains included EUR 11 million
relating to the disposal of the Hackett subsidiary in June 2005 and EUR 19
million primarily relating to a sale- and-leaseback transaction in respect of a
Cartier boutique. The impact of non-recurring items is analysed later in
this document.
Operating profit increased by 24 per cent to EUR 916 million. Excluding net
non-recurring gains, the underlying operating profit from the Group`s luxury
businesses increased by 26 per cent to EUR 900 million, compared to EUR 713
million in the prior year.
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 EUR millions March 2007 March 2006
Sales
Jewellery Maisons 2 435 2 227 +9%
Specialist watchmakers 1 203 1 063 + 13%
Writing instrument Maisons 585 497 + 18%
Leather and accessories Maisons 307 283 +8%
Other businesses 297 238 + 25%
Total sales 4 827 4 308 + 12%
Operating results
Jewellery Maisons 667 616 +8%
Specialist watchmakers 274 227 + 21%
Writing instrument Maisons 110 83 + 33%
Leather and accessories Maisons (11) (38) + 71%
Other businesses 20 22 -9%
1 060 910 + 16%
Corporate costs (144) (169) - 15%
Central support services (137) (154) - 11%
Other operating expense, net (7) (15) - 53%
Operating profit 916 741 + 24%
Further analysed as follows:
Underlying operating profit from luxury
business 900 713 + 26%
Non-recurring items - Leather and
accessories Maisons 16 -
Non-recurring items - Jewellery Maisons - 19
Non-recurring items - Other operating
expense, net - 9
Operating profit 916 741 + 24%
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.
Following the introduction of IFRS 2 Share-based Payment in 2005, charges for
stock options have been allocated, in both periods, to operating costs within
the relevant business areas and central support services.
Jewellery Maisons
Of the Group`s Jewellery Maisons, Cartier reported double-digit growth at
constant rates in all regions with the exception of Japan, which saw modest
growth. Van Cleef & Arpels also enjoyed very good growth in sales;
products linked to the Maison`s centenary in 2006 and related communications
activity contributed to the strong performance. Operating profit for the
business area as a whole increased by 8 per cent to EUR 667 million with an
operating margin of 27 per cent, broadly in line with the prior year`s level.
The operating profit in the comparative period included non-recurring net
property disposal gains amounting to EUR 19 million.
Specialist Watchmakers
High levels of demand continued in all regions, generating double-digit sales
growth for the Group`s specialist watchmakers. Most notably, sales of both
Panerai and A. Lange & Sohne grew strongly during the year. A 13 per cent
increase in sales combined with operating leverage generated a 21 per cent
increase in operating profit.
Writing Instrument Maisons
Montblanc also celebrated its centenary during 2006.
Sales benefited from the special centenary products, the programme of events
surrounding the anniversary and the continued success of the new Montblanc
female jewellery line, launched in late 2005. The further development of
Montblanc`s retail network contributed 6 per cent to the growth in the Maison`s
sales overall. The Maison performed well in all geographic regions. Sales
increased by 18 per cent and operating profit increased by 33 per cent.
Operating margin, including Montegrappa, improved by two percentage points to
19 per cent.
Leather and Accessories Maisons
Improved sales in this business area combined with non-recurring gains have
resulted in a reduction in losses from EUR 38 million to EUR 11 million.
Alfred Dunhill reported double-digit growth at constant exchange rates in the
Asia-Pacific region for the year, helped by the development of its retail
network. However, sales in Japan were flat in local currency terms. Alfred
Dunhill`s overall operating losses declined from EUR 30 million in the prior
year to EUR 8 million, after taking into account the benefit of a non-
recurring, net gain of EUR 16 million on the disposal of a property.
Lancel reported a double-digit increase in sales for the year at constant
rates, reflecting growth driven by the success of its new products. Lancel`s
operating losses significantly decreased from EUR 8 million in the prior year
to EUR 3 million.
Other businesses
The growth in sales in the Group`s other businesses primarily reflects the
continuing development of Chloe. Chloe`s sales increased by over 50 per cent
during the year, the Maison benefiting from a substantial increase in its
retail network. Exceptional growth in the first six months was offset by more
moderate growth in the latter part of the year, measured against a higher
comparative base.
Prior year comparative figures for `other businesses` include the results of
two businesses disposed of during that year: Hackett is included for the
two-month period to 31 May 2005 and Old England for the twelve-month period to
31 March 2006. Total sales in the comparative period from these two businesses
amounted to EUR 18 million. The operating results of both entities were
immaterial.
Corporate costs
Corporate costs include central support services such as strategic management,
marketing and functional support, legal services, manufacturing and logistics,
intellectual property, finance, human resources and information technology
together with central marketing initiatives. These and other net expenses are
not allocated to specific business areas.
Operating profit
Operating profit after corporate costs reached EUR 916 million, an increase of
24 per cent over the prior year. This increase reflects the growth in sales,
the improvement in gross margins and continuing cost control. The Group
operating profit margin increased from 17 per cent to 19 per cent.
Sales by region
Movement at:
Constant Actual
exchange exchange
in EUR millions March 2007 March 2006 rates rates
Europe 2 042 1 811 +13% +13%
Asia-Pacific 1 070 899 +24% +19%
Americas 984 875 +18% +12%
Japan 731 723 +10% +1%
4 827 4 308 +16% +12%
Europe
The overall increase of 13 per cent reflects double-digit growth in all
business areas. Montblanc and the specialist watchmakers all performed very
well over the course of the year.
Asia-Pacific
Sales grew at a faster rate during the fourth quarter than had been seen during
the first nine months of the year. Excellent demand was seen in all business
areas. Both Montblanc and Alfred Dunhill benefited from the development of
their own retail distribution networks in mainland China during the year.
Sales in mainland China, representing 16 per cent of regional sales, increased
by 47 per cent at historic rates. The high rate of growth reflects the Group`s
investment in this market, including the establishment of distribution
subsidiaries and retail and wholesale platforms, as well as the growing demand
there.
Americas
The Americas region reported strong underlying growth of 18 per cent,
notwithstanding the good performance seen in the prior year and the challenging
comparative base. The decrease in the value of the dollar relative to the euro
during the year resulted in sales growth of 12 per cent at actual exchange
rates.
Japan
Sales growth of 10 per cent in the domestic Japanese market was largely offset
by the weakness of the yen when translated into euros. At actual rates, sales
grew by only 1 per cent. Sales in Japan represent 15 per cent of Group sales.
Sales by distribution channel
in EUR millions March 2007 March 2006
Retail 2 009 1 762 + 14%
Wholesale 2 818 2 546 + 11%
4 827 4 308 + 12%
Retail
Retail sales increased by 14 per cent to EUR 2 009 million. This high level of
growth reflected both good trading at established boutiques and the expansion
of the network of Group-owned points of sale. The total retail network
increased by 79 to 1 154 boutiques. This includes the acquisitions of boutiques
in China by Montblanc and Alfred Dunhill. At the end of March, the Group`s
Maisons owned 673 boutiques, with a further 481 points of sale being operated
by franchise partners.
Wholesale
Wholesale sales increased by 11 per cent overall, with high rates of growth
seen at Van Cleef & Arpels, Chloe and certain specialist watchmakers.
Summary income statement and results of associates
in EUR millions March 2007 March 2006
Operating profit 916 741
Net finance income 31 5
Profit before taxation 947 746
Taxation (158) (136)
Share of post-tax results of associated
undertakings 540 486
Before non-recurring expenses 578 526
Share of non-recurring expenses (38) (40)
Net profit 1 329 1 096
Attributable to unitholders 1 328 1 094
Attributable to minority interests 1 2
Net profit 1 329 1 096
Net finance income amounting to EUR 31 million includes net interest income,
net foreign exchange gains and losses and fair value adjustments. Net fair
value gains in the year amounted to EUR 16 million (2006: EUR 15 million loss),
including the appreciation of certain listed and unlisted investments. Under
IFRS, such investments and other `fair value financial assets` must be revalued
at the balance sheet date with reference to market valuations. This `marked to
market` approach inevitably creates volatility in the reported finance income
line. Further volatility is to be expected in future years.
Excluding the Group`s share of the results of its investment in British
American Tobacco, the Group`s effective taxation rate was 16.7 per cent
compared with 18.2 per cent last year. The effective taxation rate in general
reflects the lower level of corporate taxes in Switzerland compared to other
jurisdictions. The reduction in the effective taxation rate reflects the
deductibility of costs related to share-based payments for the first time.
Associated companies
The Group`s principal associated company is British American Tobacco plc.
Richemont has an effective interest of 19.0 per cent in British American
Tobacco, with a market value at 31 March 2007 of EUR 9 130 million.
In addition, the Group has a number of smaller investments which are classified
as associated companies. These other associated companies have no material
impact on the Group`s financial statements. The Group`s share of results of
these smaller investments amounted to a profit of EUR 1 million (2006: nil)
British American Tobacco plc (`BAT`)
For the year ended 31 March 2007, the Group`s share of the results of BAT
increased to EUR 539 million. Excluding non-recurring income and expense from
both years, the Group`s share of the results of BAT would have increased by 10
per cent to EUR 577 million.
Non-recurring items in respect of BAT are reported net of taxation and minority
interests in this report. Non-recurring items include those of BAT`s
subsidiary companies as well as its own associated companies.
The presentation of post-tax impact of such non-recurring items, rather than
the pre-tax effect, represents a change to the approach taken in previous
years. There is no impact on the Group`s IFRS results.
Further details are given later in this announcement.
In its financial year ended 31 March 2007, Richemont accounted for BAT`s nine
months ended 31 December 2006 and three months ended 31 March 2007. In the
comparative period, the same approach was applied. The following table presents
the Group`s effective interest in BAT applied in the current and the prior year
periods. The increases in the Group`s interest in both the current and prior
year were due to the share buy- back programme carried out by BAT.
2006-07 2005-06
% %
1 April to 30 June 18.8 18.4
1 July to 30 September 18.9 18.5
1 October to 31 December 18.9 18.6
1 January to 31 March 19.0 18.6
BAT reports its results in sterling. As the average euro: sterling exchange
rate, at 0.68, was broadly the same for the past two years, there was virtually
no direct impact on the Group`s share of BAT`s results on translation into
euros due to exchange rate movements.
In cash flow terms, the Group received dividends totalling EUR 280 million from
BAT during the year (2006: EUR 247 million).
In BAT`s financial year to 31 December 2006, its adjusted, diluted earnings per
share, a good indicator of its underlying performance, grew by 10 per cent to
98.12 pence per share. This increase was the result of the improved underlying
operating performance from both subsidiaries and associates, together
with a lower effective tax rate and the benefit the share buy-back
programme, which more than offset the impact of higher net finance costs
and minorities.
The following commentary is condensed from BAT`s annual report for the year
ended 31 December 2006.
BAT cigarette sales volumes from subsidiaries for the year ended 31 December
2006 increased by 2 per cent to 689 billion on both a reported and a
`like-for-like` basis. Net revenues rose by 5 per cent on both an actual and
`like-for-like` basis. This volume and revenue growth was achieved across a
broad spread of markets. The four global `drive brands` (Kent, Dunhill, Lucky
Strike and Pall Mall) continued their impressive performance and achieved
overall volume growth of 17 per cent. These brands now represent over 21 per
cent of BAT`s volumes from subsidiaries, while international brands as a whole
account for 40 per cent of the total.
BAT`s profit from operations was 8 per cent higher at GBP 2 622 million or 7 per
cent higher on a `like-for-like` basis, with Asia-Pacific, Latin America and
the Africa and Middle East regions contributing to these results.
In Europe, profit at GBP 781 million was slightly lower mainly as a result of
very competitive trading conditions in a number of markets and the inclusion in
the comparative period of a one-off benefit in Italy. Excluding this benefit,
profit increased by GBP 9 million, with strong growth from Russia, Hungary,
Italy
and France, largely offset by declines in Spain, Poland, Germany, the
Netherlands and Ukraine. Regional volumes on a `like-for-like` basis were 2 per
cent higher at 248 billion, with growth in Russia, France, Spain and Hungary
partly offset by declines in Ukraine, Italy and Germany.
In Asia-Pacific, regional profit increased by GBP 85 million to GBP 616 million,
mainly attributable to good performances in Australasia, Malaysia, South Korea
and Pakistan. Volumes at 142 billion were 4 per cent higher as strong increases
in Pakistan, Bangladesh, South Korea and Vietnam were partially offset by
declines in Malaysia and Indonesia.
Profit in Latin America increased by GBP 81 million to GBP 611 million due to
good performances across the region, coupled with a stronger average exchange
rate in Brazil. Volumes grew in many of the markets which led to an overall
increase of 2 per cent to 153 billion.
Profit in the Africa and Middle East region grew by GBP 34 million to GBP 468
million, mainly driven by South Africa, Nigeria, the Middle East and Egypt.
Volumes were slightly higher at 103 billion, as a result of Nigeria, Egypt and
the Middle East, partially offset by decreases in Turkey.
The profit from the America-Pacific region decreased by GBP 12 million to GBP
424 million, while volumes were down 3 per cent to 44 billion sticks. The
increases in profit and volumes from Japan were more than offset by lower
contributions from Canada.
BAT`s associated companies grew their volumes by 4 per cent to 241 billion
sticks. BAT`s share of the post- tax results amounted to GBP 431 million.
Excluding exceptional items, the share of the post-tax results of associates,
increased by GBP 38 million to GBP 427 million, mainly from Reynolds American
and ITC. The contribution from Reynolds American, excluding brand impairment
charges and the benefit from the favourable resolution of certain tax matters
in both years as well as other exceptional charges in 2005, was GBP 18 million
higher at GBP 285 million. This was mainly due to improved pricing and cost
reductions, partially offset by lower volumes. The contribution from ITC, BAT`s
associate in India, increased by GBP 11 million to GBP 91 million.
Further information in respect of British American Tobacco can be obtained
from that company`s website: www.bat.com.
Analysis of underlying net profit attributable to unitholders
March 2007
in EUR millions Underlying Non-recurring IFRS
items
Sales 4 827 - 4 827
Operating profit 900 16 916
Net profit - parent and
subsidiaries 772 16 788
Share of post-tax profit of
associates 578 (38) 540
Net profit attributable to
unitholders 1 350 (22) 1 328
Underlying earnings per unit
excluding
non-recurring items
Basic EUR 2.405 EUR 2.366
Diluted basis EUR 2.369 EUR 2.331
March 2006
in EUR millions Underlying Non-recurring IFRS
items
Sales 4 308 - 4 308
Operating profit 713 28 741
Net profit - parent and
subsidiaries 586 22 608
Share of post-tax profit of
associates 526 (40) 486
Net profit attributable to
unitholders 1 112 (18) 1 094
Underlying earnings per unit
excluding
non-recurring items
Basic EUR 2.010 EUR 1.978
Diluted basis EUR 1.983 EUR 1.951
During the year, the Group realised non-recurring income of EUR 16 million,
being a net gain on the disposal of a retail property by Alfred Dunhill.
During the prior year, the Group realised non-recurring income of EUR 28
million, being principally a gain on the disposal of a retail property by
Cartier and the Group`s disposal of Hackett, a menswear business. Net of
taxation, this non-recurring income amounted to EUR 22 million.
The non-recurring items included in the Group`s share of the results of its
associate, British American Tobacco, amounted to a net charge of EUR 38 million
in the year under review. This primarily reflected restructuring charges, net
of gains and losses on the disposal of businesses and brands. Non-recurring
items include those of BAT`s subsidiary companies as well as its own
associated companies.
The presentation of BAT`s non-recurring items has been revised. The
non-recurring expense reported for the comparative period has been revised from
a charge of EUR 58 million at the pre-tax level reported last year to a
post-tax charge of EUR 40 million. The overall contribution from BAT on an
IFRS basis remains unchanged.
The presentational change has no effect on the
Group`s IFRS-reported results or balance sheet. The comparative, underlying net
Group profit shown above has been amended, together with the underlying
earnings per unit. The revised underlying net profit attributable to unitholders
for the year ended 31 March 2006 is EUR 1 112 million. The amount previously
reported was EUR 1 130 million.
Excluding non-recurring items from both years, attributable net profit in the
year to 31 March 2007 would have been EUR 1 350 million compared to EUR 1 112
million in the prior year, an increase of 21 per cent.
Excluding non-recurring items, Richemont`s basic earnings per unit would have
increased by 20 per cent from EUR 2.010 to EUR 2.405 and diluted earnings per
unit would have increased by 19 per cent from EUR 1.983 to EUR 2.369.
Cash flow
in EUR millions March 2007 March 2006
Operating profit 916 741
Depreciation and other non-cash items 175 159
Increase in working capital (121) (126)
Cash generated from operations 970 774
Dividends received from associate 280 247
Net interest received 27 2
Taxation paid (177) (85)
Net acquisitions of tangible fixed assets (201) (166)
Net acquisitions of intangible assets (20) (23)
Other investing activities, net (126) (4)
Net cash inflow before financing activities 753 745
Dividends paid to unitholders (612) (553)
Ordinary dividend (334) (276)
Special dividend (278) (277)
Decrease in borrowings and other financing
activities (14) (43)
Net proceeds from sale of treasury units 63 90
Exchange rate effects 17 (6)
Increase in cash and cash equivalents 207 233
Cash and cash equivalents at the beginning of the
year 1 416 1 183
Cash and cash equivalents at end of year (1) 1 623 1 416
Borrowings (482) (532)
Net cash at the end of the year 1 141 884
The Group`s net cash position at 31 March 2007 was EUR 1 141 million compared
with EUR 884 million twelve months earlier. The increase in net cash largely
reflected the net cash inflow before financing activities of EUR 753 million,
partly offset by the payment of dividends to unitholders in September 2006.
The net cash inflow from operations totalled EUR 970 million for the year, the
increase in earnings being partially offset by increases in inventories and
debtors. The increase in trade debtors was lower than the level of wholesale
sales growth.
Net acquisitions of tangible fixed assets amounted to EUR 201 million. This
included investments in the boutique network, including flagship boutiques for
Van Cleef & Arpels and Montblanc, as well as the further development of the
Maisons` manufacturing facilities.
Certain development costs associated with the implementation of the Group-wide
IT-based, enterprise resource planning system were also capitalised during the
year.
Dividends received from BAT comprised the final dividend in respect of its
financial year ended 31 December 2005 and the interim dividend for the 2006
financial year.
During the year, some 5.4 million treasury units were sold by the company in
connection with the exercise of stock options by executives, resulting in a
gross cash inflow of EUR 77 million. The Group currently uses over-the-counter
call options over Richemont units to hedge its exposure to executives in terms
of the stock option plan. The cost of such options is included in the net
proceeds from sale of treasury units above.
(1) Cash and cash equivalents are as per the consolidated cash flow statement
presented later in this report.
Summarised balance sheet
in EUR millions 31 March 2007 31 March 2006
Non-current assets
Fixed assets 922 809
Investment in associated undertakings 3 506 3 347
Other non-current assets 546 450
4 974 4 606
Net current assets 1 594 1 476
Net operating assets 6 568 6 082
Net cash 1 141 884
Cash and cash equivalents 1 623 1 416
Borrowings (482) (532)
Other non-current liabilities (196) (185)
7 513 6 781
Equity
Unitholders` equity 7 511 6 773
Minority interests 2 8
7 513 6 781
The Group`s principal associated undertaking is British American Tobacco, in
which it held a 19 per cent interest at 31 March 2007. BAT`s market
capitalisation at that date, based on 2 055 million ordinary shares in issue,
amounted GBP 32 658 million. The fair value of the Group`s investment in British
American Tobacco therefore amounted to GBP 6 197 million or EUR 9 130 million at
31 March 2007.
Net current assets were EUR 118 million above the level of the prior year-end
at EUR 1 594 million. Net inventories increased by 7 per cent to EUR 1 732
million, although stock rotation rates improved to 15.1 months (2006:
15.5 months). Year-end trade debtors increased by some 7 per cent, reflecting
both the seasonality of wholesale sales and the growth seen during the
latter part of the year. The increases in inventories and debtors were
partly offset by increases in current liabilities, primarily relating to
trade and other creditors.
Net cash at 31 March 2007 amounted to EUR 1 141 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, euros, yen, US dollars, Hong Kong dollars and Swiss francs.
Borrowings reflect the financing of net operating assets in the countries
concerned.
The Group`s equity amounted to EUR 7 513 million, net of the cost of
repurchased treasury units and related instruments. These treasury units are
held as a hedge against the exercise of executive unit options. At 31 March
2007, the group held 12.8 million treasury units, representing 2.5 per cent of
the total number of the `A` bearer units in issue.
Proposed dividend
The Board has proposed an ordinary dividend of EUR 0.65 per unit, an increase
of 8 per cent over the prior year`s level. In addition, the Board has proposed
that a special dividend of EUR 0.60 should be paid to unitholders. The total
gross dividend thus amounts to EUR 1.25 per unit (2006: EUR 1.10 per unit).
Withholding tax is payable on the proposed dividend to be paid by Compagnie
Financiere Richemont SA, Switzerland as detailed in the table below.
The dividends will be payable following the Annual General Meeting in September
2007. The anticipated dividend payment dates are as follows:
`A` unit dividend: Monday, 17 September 2007
South African Depository Receipt dividend: Friday, 28 September 2007
The dividend in respect of Richemont `A` units is payable in euros.
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 euros to non-CMA residents.
The dividend will be paid
as follows: Gross dividend Withholding Net payable
per unit tax @ 35% per unit
Ordinary dividend
Richemont SA, Luxembourg EUR 0.5960 - EUR 0.5960
Compagnie Financiere
Richemont SA, Switzerland EUR 0.0540 (EUR 0.0189) EUR 0.0351
EUR 0.6500 (EUR 0.0189) EUR 0.6311
Special dividend
Richemont SA, Luxembourg EUR 0.6000 - EUR 0.6000
EUR 1.2500 (EUR 0.0189) EUR 1.2311
Annual General Meeting
The Annual General Meeting of shareholders of Compagnie Financiere Richemont
SA will be held at 10.00 a.m. on Thursday 13th September 2007 at the Company`s
head office in Bellevue, Geneva.
Norbert Platt Richard Lepeu
Chief Executive Officer Group Finance Director
Compagnie Financiere Richemont SA
Geneva, 24 May 2007
Extracts from the audited consolidated financial statements at 31 March 2007
Consolidated balance sheet
at 31 March
2007 2006
ASSETS Note EUR m EUR m
Non-current assets
Property, plant and equipment 808 742
Intangible assets 114 67
Investments in associated undertakings 2 3 506 3 347
Deferred income tax assets 268 261
Financial assets held at fair value through profit
or loss 113 25
Other non-current assets 165 164
4 974 4 606
Current assets
Inventories 1 732 1 623
Trade and other receivables 658 602
Derivative financial instruments 15 7
Prepayments and accrued income 121 127
Cash at bank and on hand 1 881 1 628
4 407 3 987
Total assets 9 381 8 593
EQUITY AND LIABILITIES
Equity
Share capital 334 334
Participation reserve 645 645
Treasury units (264) (408)
Hedge and unit option reserves 151 72
Cumulative translation adjustment reserve 113 38
Retained earnings 6 532 6 092
Total Unitholders` equity 7 511 6 773
Minority interest 2 8
Total equity 7 513 6 781
LIABILITIES
Non-current liabilities
Borrowings 203 158
Deferred income tax liabilities 32 33
Retirement benefit obligations 103 101
Provisions 61 51
399 343
Current liabilities
Trade and other payables 488 404
Current income tax liabilities 160 202
Borrowings 28 50
Derivative financial instruments 2 11
Provisions 90 85
Accruals and deferred income 192 181
Short-term loans 251 324
Bank overdrafts 258 212
1 469 1 469
Total liabilities 1 868 1 812
Total equity and liabilities 9 381 8 593
Consolidated income statement
for the year ended 31 March
2007 2006
EUR m EUR m
Notes
Sales 1 4 827 4 308
Cost of sales (1 753) (1 588)
Gross profit 3 074 2 720
Selling and distribution expenses (1 090) (1 000)
Communication expenses (570) (503)
Administrative expenses (503) (509)
Other operating income 3 5 33
After:
Net gain from sale of subsidiary undertaking - 11
Operating profit 916 741
Finance costs 4 (58) (57)
Finance income 4 89 62
Share of post-tax profit of associated
undertakings 2 540 486
Profit before taxation 1 487 1 232
Taxation 5 (158) (136)
Net profit 1 329 1 096
Attributable to:
Unitholders 1 328 1 094
Minority interest 1 2
1 329 1 096
Earnings per unit for profit attributable to
Unitholders during
the year (expressed in EUR per unit)
- basic 6 2.366 1.978
- diluted 6 2.331 1.951
Consolidated statement of changes in equity
for the year ended 31 March
Equity attributable to Unitholders
Unitholders` Treasury Other
capital units reserves
EUR m EUR m EUR m
Balance at 1 April 2005 979 (560) 64
Currency translation adjustments - - -
Cash flow hedges:
- net losses - - (29)
- recycle to income statement - - 3
Net share of expense of associated
undertakings recognised directly in
equity - - -
Net income / (expense) recognise
directly in equity - - (26)
Net profit - - -
Total recognised income / (expense) - - (26)
Net share of transactions of
associated
undertakings with their equity
holders - - -
Net changes in treasury units - 152 -
Employee unit option scheme - - 34
Dividends paid - - -
Balance at 31 March 2006 979 (408) 72
Currency translation adjustments - - -
Cash flow hedges:
- net gains - - 22
- recycle to income statement - - (3)
Net share of expense of associated
undertakings recognised directly in
equity - - -
Deferred taxation on unit option
scheme - - 29
Net income recognised
directly in equity - - 48
Net profit - - -
Total recognised income - - 48
Acquisition of minority interest - - -
Net share of transactions of
associated
undertakings with their equity
holders - - -
Net changes in treasury units - 144 -
Employee unit option scheme - - 31
Dividends paid - - -
Balance at 31 March 2007 979 (264) 151
Equity attributable to Unitholders
Cumulative
translation
adjustment Retained
reserve earnings
EUR m EUR m
Balance at 1 April 2005 24 5 768
Currency translation adjustments 14 -
Cash flow hedges:
- net losses - -
- recycle to income statement - -
Net share of expense of associated
undertakings recognised directly in equity - (18)
Net income / (expense) recognise
directly in equity 14 (18)
Net profit - 1 094
Total recognised income / (expense) 14 1 076
Net share of transactions of associated
undertakings with their equity holders - (137)
Net changes in treasury units - (62)
Employee unit option scheme - -
Dividends paid - (553)
Balance at 31 March 2006 38 6 092
Currency translation adjustments 75 -
Cash flow hedges:
- net gains - -
- recycle to income statement - -
Net share of expense of associated
undertakings recognised directly in equity - (97)
Deferred taxation on unit option scheme - -
Net income recognised
directly in equity 75 (97)
Net profit - 1 328
Total recognised income 75 1 231
Acquisition of minority interest - -
Net share of transactions of associated
undertakings with their equity holders - (98)
Net changes in treasury units - (81)
Employee unit option scheme - -
Dividends paid - (612)
Balance at 31 March 2007 113 6 532
Minority Total
Total interest equity
EUR m EUR m EUR m
Balance at 1 April 2005 6 275 6 6 281
Currency translation adjustments 14 - 14
Cash flow hedges:
- net losses (29) - (29)
- recycle to income statement 3 - 3
Net share of expense of associated
undertakings recognised directly in equity (18) - (18)
Net income / (expense) recognise
directly in equity (30) - (30)
Net profit 1 094 2 1 096
Total recognised income / (expense) 1 064 2 1 066
Net share of transactions of associated
undertakings with their equity holders (137) - (137)
Net changes in treasury units 90 - 90
Employee unit option scheme 34 - 34
Dividends paid (553) - (553)
Balance at 31 March 2006 6 773 8 6 781
Currency translation adjustments 75 - 75
Cash flow hedges:
- net gains 22 - 22
- recycle to income statement (3) - (3)
Net share of expense of associated
undertakings recognised directly in equity (97) - (97)
Deferred taxation on unit option scheme 29 - 29
Net income recognised
directly in equity 26 - 26
Net profit 1 328 1 1 329
Total recognised income 1 354 1 1 355
Acquisition of minority interest - (7) (7)
Net share of transactions of associated
undertakings with their equity holders (98) - (98)
Net changes in treasury units 63 - 63
Employee unit option scheme 31 - 31
Dividends paid (612) - (612)
Balance at 31 March 2007 7 511 2 7 513
Consolidated cash flow statement
for the year ended 31 March
2007 2006
Note EUR m EUR m
Cash flows from operating activities
Cash flow generated from operations 7 970 774
Interest received 60 37
Interest paid (33) (35)
Dividends from associated undertaking 280 247
Taxation paid ( 177) ( 85)
Net cash generated from operating activities 1 100 938
Cash flows from investing activities
Acquisition of subsidiary undertakings, net of
cash acquired (19) (7)
Proceeds from disposal of subsidiary undertakings - 15
Acquisition of associated undertakings (4) -
Acquisition of minority interest (20) -
Acquisition of property, plant and equipment (207) (210)
Proceeds from disposal of property, plant and
equipment 6 44
Acquisition of intangible assets (40) (24)
Proceeds from disposal of intangible assets 20 1
Acquisition of other non-current assets (102) (39)
Proceeds from disposal of other non-current assets 19 27
Net cash used in investing activities (347) (193)
Cash flows from financing activities
Proceeds from borrowings 284 81
Repayment of borrowings (295) (120)
Dividends paid (612) (553)
Payment for treasury units (14) -
Proceeds from sale of treasury units 77 90
Capital element of finance lease payments (3) (4)
Net cash used in financing activities (563) (506)
Net increase in cash and cash equivalents 190 239
Cash and cash equivalents at beginning of year 1 416 1 183
Exchange gains/(losses) on cash and cash
equivalents 17 (6)
Cash and cash equivalents at end of year 1 623 1 416
Notes to the consolidated financial statements
31 March 2007
Accounting policies and basis of preparation
These consolidated financial statements of the Company are for the year ended
31 March 2007. They have been prepared in accordance with International
Financial Reporting Standards (`IFRS`).
The financial statements are presented in millions of euros; the euro
represents the functional and presentational currency of the Group.
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 opted to use 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
specialist watchmakers comprise Jaeger-LeCoultre, Baume & Mercier, IWC,
- Vacheron Constantin, A. Lange & Sohne, Piaget and Officine Panerai.
- Writing Instrument Maisons - businesses whose primary activity includes
the design, manufacture and distribution of writing instruments. These are
Montblanc and Montegrappa.
- Leather and Accessories Maisons - businesses whose principal activities
include the design and distribution of leather goods and other accessories,
being Alfred Dunhill and Lancel.
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 cannot be meaningfully attributed to the segments.
The entire product range of a particular Maison, which may include jewellery,
watches, writing instruments, jewellery 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
2007 2006
Sales: EUR m EUR m
Jewellery Maisons 2 435 2 227
Specialist Watchmakers 1 203 1 063
Writing Instrument Maisons 585 497
Leather and Accessories Maisons 307 283
Other Businesses 297 238
4 827 4 308
Inter-segment sales
2007 2006
Sales: EUR m EUR m
Jewellery Maisons 1 15
Specialist Watchmakers 5 9
Writing Instrument Maisons 11 7
Leather and Accessories Maisons - 8
Other Businesses 97 75
114 114
Total segment sales
2007 2006
Sales: EUR m EUR m
Jewellery Maisons 2 436 2 242
Specialist Watchmakers 1 208 1 072
Writing Instrument Maisons 596 504
Leather and Accessories Maisons 307 291
Other Businesses 394 313
4 941 4 422
2007 2006
Operating result: EUR m EUR m
Jewellery Maisons 667 616
Specialist Watchmakers 274 227
Writing Instrument Maisons 110 83
Leather and Accessories Maisons (11) (38)
Other Businesses 20 22
Corporate (144) (169)
Operating profit 916 741
Finance costs (58) (57)
Finance income 89 62
Operating profit before share of results of associated
undertakings 947 746
Share of post-tax profit of associated undertakings 540 486
Profit before taxation 1 487 1 232
Taxation (158) (136)
Net profit 1 329 1 096
Net segment assets at 31 March are as follows:
Segment assets
2007 2006
Segment assets: EUR m EUR m
Jewellery Maisons 1 656 1 550
Specialist Watchmakers 843 778
Writing Instrument Maisons 362 313
Leather and Accessories Maisons 169 150
Other Businesses 211 155
Corporate 485 411
3 726 3 357
Investments in associated undertakings 3 506 3 347
Cash and cash equivalents 1 881 1 628
Short-term loans and borrowings - -
Retirement benefit obligations - -
Deferred and current income tax, net 268 261
Net assets 9 381 8 593
Segment liabilities
2007 2006
Segment liabilities: EUR m EUR m
Jewellery Maisons (259) (215)
Specialist Watchmakers (135) (107)
Writing Instrument Maisons (80) (70)
Leather and Accessories Maisons (67) (54)
Other Businesses (86) (57)
Corporate (206) (229)
(833) (732)
Investments in associated undertakings - -
Cash and cash equivalents (258) (212)
Short-term loans and borrowings (482) (532)
Retirement benefit obligations (103) (101)
Deferred and current income tax, net (192) (235)
Net assets (1 868) (1 812)
Net segment assets
2007 2006
Net segment assets: EUR m EUR m
Jewellery Maisons 1 397 1 335
Specialist Watchmakers 708 671
Writing Instrument Maisons 282 243
Leather and Accessories Maisons 102 96
Other Businesses 125 98
Corporate 279 182
2 893 2 625
Investments in associated undertakings 3 506 3 347
Cash and cash equivalents 1 623 1 416
Short-term loans and borrowings (482) (532)
Retirement benefit obligations (103) (101)
Deferred and current income tax, net 76 26
Net assets 7 513 6 781
Other segment information for the years ended 31 March is as follows:
Items related to Capital expenditure
property, plant, equipment 2007 2006
and intangible assets: EUR m EUR m
Jewellery Maisons 104 96
Specialist Watchmakers 49 36
Writing Instrument Maisons 33 18
Leather and Accessories Maisons 20 11
Other Businesses 20 17
Corporate 34 56
260 234
Depreciation/amortisation
Items related to charge
property, plant, equipment 2007 2006
and intangible assets: EUR m EUR m
Jewellery Maisons 54 48
Specialist Watchmakers 26 23
Writing Instrument Maisons 19 18
Leather and Accessories Maisons 11 10
Other Businesses 10 8
Corporate 24 27
144 134
Unit option costs
2007 2006
Other non-cash items: EUR m EUR m
Jewellery Maisons 6 6
Specialist Watchmakers 4 4
Writing Instrument Maisons 2 2
Leather and Accessories Maisons 1 1
Other Businesses 1 1
Corporate 19 22
33 36
(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
2007 2006
EUR m EUR m
Europe 2 042 1 811
France 462 409
Switzerland 211 195
Germany, Italy and Spain 671 607
Other Europe 698 600
Asia 1 801 1 622
China/Hong Kong 600 492
Japan 731 723
Other Asia 470 407
Americas 984 875
USA 771 685
Other Americas 213 190
4 827 4 308
Segment assets at 31 March
2007 2006
EUR m EUR m
Europe 2 587 2 363
France 470 424
Switzerland 1 364 1 272
Germany, Italy and Spain 445 401
Other Europe 308 266
Asia 690 578
China/Hong Kong 278 166
Japan 276 277
Other Asia 136 135
Americas 449 416
USA 393 352
Other Americas 56 64
3 726 3 357
Capital expenditure
2007 2006
EUR m EUR m
Europe 178 167
France 26 37
Switzerland 88 95
Germany, Italy and Spain 33 18
Other Europe 31 17
Asia 54 42
China/Hong Kong 21 10
Japan 22 20
Other Asia 11 12
Americas 28 25
USA 25 24
Other Americas 3 1
260 234
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
EUR m EUR m EUR m
At 1 April 2005 3 218 - 3 218
Exchange adjustments 41 - 41
Share of post-tax profit 486 - 486
Dividends received (247) - (247)
Transfer from unlisted undertakings - 4 4
Other equity movements (155) - (155)
At 31 March 2006 3 343 4 3 347
Exchange adjustments 90 - 90
Share of post-tax profit 539 1 540
Dividends received (280) - (280)
Acquisition of associated undertakings - 4 4
Other equity movements (195) - (195)
At 31 March 2007 3 497 9 3 506
Investments in associated undertakings at 31 March 2007 include goodwill of
EUR 2 583 million (2006: EUR 2 510 million).
British American Tobacco (`BAT`)
The summarised financial information in respect of the Group`s share of
results, assets and liabilities of its principal associated undertaking, BAT,
is as follows:
2007 2006
EUR m EUR m
Operating profit 748 668
After:
Share of other expense (41) (64)
Finance costs (106) (106)
Finance income 28 37
Share of post-tax profit of associates 118 115
Profit before taxation 788 714
Taxation (205) (191)
Net profit 583 523
Attributable to:
Minority interest 44 37
Share of post-tax profit 539 486
583 523
Richemont accounts for its effective interest in BAT under the equity method.
At 31 March 2007, the Group held an effective interest of 19.0 per cent in BAT.
The Group has joint control of R&R Holdings SA, Luxembourg (`R&R`) which holds
29.4 per cent of BAT, and this joint venture has the ability to exert
significant influence over BAT, including representation on the Board of
Directors. Thus, Richemont considers BAT to be an associated undertaking.
The market capitalisation of BAT ordinary shares at 31 March 2007 was
GBP 32 658 million (2006: GBP 29 161 million). The fair value of the Group`s
effective interest of 19.0 per cent in BAT ordinary shares at that date was
EUR 9 130 million (2006: effective interest 18.6 per cent, fair value
EUR 7 796 million).
3. Other operating income
2007 2006
EUR m EUR m
Royalty income - net 13 15
Profit on sale of an interest in a leasehold property 19 -
Net gain on disposal of subsidiary undertaking - 11
Other income/(expenses) (27) 7
5 33
4. Net finance income
2007 2006
Finance income: EUR m EUR m
Interest income on bank and other deposits 62 32
Dividend income on financial assets at fair value through
profit or loss 2 4
Net changes in fair value of financial assets at fair value
through profit or loss 16 -
Net foreign exchange gains on monetary items - 26
Net foreign exchange gains on derivatives 9 -
Finance income 89 62
Finance costs:
Interest expense:
- bank borrowings (32) (18)
- other financial expenses (2) (3)
Net changes in fair value of financial assets at fair value
through profit or loss - (15)
Net foreign exchange losses on monetary items (24) -
Net foreign exchange losses on derivatives - (21)
Finance costs (58) (57)
Net finance income 31 5
Foreign exchange gains of EUR 3 million (2006: losses of EUR 3 million) were
reflected in cost of sales during the year.
5. Taxation
Taxation charge in the income statement:
2007 2006
EUR m EUR m
Current tax 144 168
Deferred tax charge/(credit) 14 (32)
158 136
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 2007 and 2006 were 16.7 per cent and
18.2 per cent respectively.
For current and future years the Group has implemented procedures to increase
further the tax effects of the costs of share-based payments. This together
with other one-time benefits, has significantly contributed to the decrease in
the effective tax rate for the year. IFRS restrict the tax benefit from
share-based payments that can be recognised through the income statement;
accordingly an amount of EUR 29 million (2006: nil) is recognised directly in
equity.
6. Earnings per unit
Basic
Basic earnings per unit is calculated by dividing the profit attributable to
Unitholders by the weighted average number of units in issue during the year,
excluding units purchased by the Company and held in treasury.
2007 2006
Profit attributable to Unitholders of the
Company (millions) 1 328 1 094
Weighted average number of units in issue (millions) 561.4 553.2
Basic earnings per unit (EUR per unit) 2.366 1.978
Diluted
Diluted earnings per unit is calculated adjusting the weighted average number
of units outstanding which assumes conversion of all dilutive potential units.
The Company has only one category of dilutive potential units: unit options.
The calculation is performed for the unit options to determine the number of
units that could have been acquired at fair value (determined as the average
annual market unit price of the Company`s units) based on the monetary value of
the subscription rights attached to outstanding unit options. The number of
units calculated as above is compared with the number of units that would have
been issued assuming the exercise of the unit options.
2007 2006
Profit attributable to Unitholders of the Company
(EUR millions) 1 328 1 094
Weighted average number of units in issue (millions) 561.4 553.2
Adjustment for unit options (millions) 8.4 7.7
Weighted average number of units for diluted earnings per
unit (millions) 569.8 560.9
Diluted earnings per unit (EUR per unit) 2.331 1.951
7. Cash flow generated from operating activities
2007 2006
EUR m EUR m
Operating profit 916 741
Depreciation and impairment of property, plant and equipment 121 115
Amortisation of intangible assets 23 19
Profit on disposal of property, plant and equipment - ( 19)
Profit on disposal of intangible assets (19) -
Increase in provisions 14 15
Increase in retirement benefit obligations 2 4
Non-cash items 34 25
Increase in inventories (145) (118)
Increase in trade debtors (56) (67)
Increase in other receivables, prepayments and accrued
income (37) (27)
Increase in current liabilities 117 86
Cash flow generated from operations 970 774
8. Share-based payment
Unit option scheme
The Group has a long-term unit-based compensation scheme whereby executives are
awarded options to acquire units at a pre-determined price. Awards under the
unit 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. During the year ended 31 March 2007,
awards of 3 343 800 options (2006: 4 475 100 options) were granted at a
weighted average exercise price of CHF 53.10 (2006: CHF 41.25) per unit.
Options in respect of 5 405 424 units (2006: 5 793 352 units) were exercised
during the year at an average exercise price of CHF 23.18 (2006: CHF 24.68) per
unit.
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 2007 March 2006
Average
United States dollar 1.28 1.22
Japanese yen 150.00 137.70
Swiss franc 1.59 1.55
Pound sterling 0.68 0.68
31 March 2007 31 March 2006
Closing
United States dollar 1.33 1.21
Japanese yen 157.22 142.77
Swiss franc 1.62 1.58
Pound sterling 0.68 0.70
Statutory Information
Shares of Compagnie Financiere Richemont SA are indivisibly twinned with
participation certificates issued by its wholly-owned subsidiary, Richemont SA,
to form Richemont `A` units. Richemont `A` units are listed on the SWX Swiss
Exchange and traded on the virt-x market (Reuters `CFR.VX`/Bloombergs `CFR
VX`/ISIN CH0012731458) and are included in the Swiss Market Index (`SMI`) of
leading stocks. The ISIN of Richemont `A` units is CH0012731458 and the Swiss
`Valorennummer` is 1273145. Depository receipts in respect of Richemont `A`
units are traded on the Johannesburg Stock Exchange, operated by JSE Limited
(Reuters `RCHJ.J`/Bloombergs `RCH SJ`).
The closing price of a Richemont `A` unit on 31 March 2007 was CHF 67.95 and
the market capitalisation of the Group`s `A` units on that date was CHF 35 470
million (2006: EUR 21 895 million). Over the preceding twelve months, the
highest closing price of an `A` unit was CHF 72.60 (22 January 2007), and the
lowest CHF 50.50 (8 June 2006).
Compagnie Financiere Richemont SA Richemont SA
Registered office: Registered office:
50 chemin de la Chenaie 35 boulevard Prince Henri
1293 Bellevue L-1724 Luxembourg
Switzerland Tel: (+352) 22 42 10
Tel: (+41) (0) 22 721 3500 Fax: (+352) 22 42 19
Fax: (+41) (0) 22 721 3550
Internet: www.richemont.com
E-mail: investor.relations@richemont.com
secretariat@richemont.com
press.office@richemont.com
(C) Richemont 2007
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
2007 was 9.0354; this compares with a rate of 7.7895 during the prior year.
in ZAR millions March 2007 March 2006
Sales 43 614 33 557 +30%
Operating profit 8 276 5 772 +43%
Net profit - parent and subsidiaries 7 129 4 752 +50%
Share of post-tax profit of associates 4 879 3 786 +29%
Net profit 12 008 8 538 +41%
Analysed as follows
Net profit attributable to unitholders 11 999 8 522
Net profit attributable to minority
interests 9 16
12 008 8 538
Earnings per depositary receipt -
diluted basis ZAR 2.1062 ZAR 1.5197 +39%
Operating profit in both years included non-recurring items of a
non-operational nature. During the year under review, the impact on operating
profit was a gain of ZAR 145 million or EUR 16 million (2006: gain of ZAR 218
million or EUR 28 million). Excluding non-recurring items, operating profit
increased by 46 per cent to ZAR 8 131 million (EUR 900 million).
The Group`s share of the results of its principle associate, British American
Tobacco, also includes non-recurring items reported by that entity. Including
the Group`s share of results from associates, the overall impact of these
non-recurring items, after taxation and minority interests, on net profit was a
loss of ZAR 199 million or EUR 22 million (2006: ZAR 140 million or EUR 18
million). Excluding non-recurring items, net profit attributable to unitholders
increased by 41 per cent to ZAR 12 198 million (EUR 1 350 million).
Subject to approval of the shareholders at the annual general meeting on 13
September 2007, it is anticipated that the dividend will be paid to Depository
Receipt holders on 28 September 2007. The rand dividend amount per Depository
Receipt will be calculated by reference to the euro/rand exchange rate
prevailing on the currency conversion date in September 2007.
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 and
28 September 2001 and, 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: 24/05/2007 07:32:02 Produced by the JSE SENS Department.
