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Richemont - Interim Results
Release Date: 14/11/2002 09:03:20 Code(s): RCH
Richemont - Interim Results
Richemont
interim results
Richemont, the Swiss luxury goods group, announces its unaudited results for the
six-month period ended 30 September 2002
Sept. 2002 Sept. 2001
Sales euro 1 784 m euro 1 836 m -3%
Operating profit euro 185 m euro 253 m -27%
Attributable profit
- parent and subsidiaries euro 134 m euro 165 m -19%
- share of associated
companies euro 270 m euro 260 m +4%
- the Group euro 404 m euro 425 m -5%
Earnings per unit - fully
diluted basis euro 0.716 euro 0.754 -5%
The results presented above exclude the effects of exceptional items reported by
associated companies and goodwill amortisation from the results of both periods.
- Sales for the first six months declined by 3 per cent to euro 1 784 million.
Excluding the adverse effect of exchange rate movements, however, sales
increased by 1 per cent.
- Jewellery sales, being principally through Cartier and Van Cleef & Arpels,
grew by 1 per cent in the period, whilst watch sales reported a decline of 3 per
cent.
- Sales in Europe declined by 4 per cent, reflecting depressed market conditions
and the reduction in tourist traffic in the region. Sales in Asia declined by 3
per cent. However, at comparable rates of exchange, sales in Japan grew by 5 per
cent; sales in the rest of the Asia region grew at a similar rate. In the
Americas, sales increased by 10 per cent in dollar terms with strong
performances by Cartier and Montblanc; on translation into euros, however, sales
in the region grew by 2 per cent.
- The decline in sales in euro terms, together with a slight weakening in the
gross margin percentage and a 3 per cent increase in operating expenses,
resulted in an overall decline in operating profit of 27 per cent.
- The Group`s equity accounted share of the results of its investment in British
American Tobacco amounted to euro 270 million, an increase of 4 per cent
compared to the prior year.
- Earnings per unit for the period on a fully diluted basis decreased by 5 per
cent from euro 0.754 to euro 0.716.
Commentary
Commenting on the results, Mr Johann Rupert, Executive Chairman, said:
"Richemont`s results for the first six months of this financial year are in line
with our expectations. The slowdown in sales - in particular in Europe -
combined with the strengthening of the euro against both the dollar and the yen
has contributed to the fall in operating profit for the period.
Sales in euros during the months of September and October have shown modest
growth compared to the same period last year. It is, however, doubtful as to
whether this represents a real pick-up in demand, as this must be viewed against
the extremely depressed sales levels experienced during September and October
2001.
I would stress that we continue to view the outlook for the remainder of the
current financial year with the utmost caution. We live in a period of chronic
uncertainty in terms of global events. Whilst I would expect that the rate of
decline in operating profit for the year as a whole should be less than that
experienced in the first six-month period, such a view is, of course, predicated
upon there being no further deterioration in market sentiment as a consequence
of events outside our control".
Business Review
Sales and operating profit
During the period under review, the Group`s results were influenced by the
continuing weakness of the economic environment generally and the decline in
tourism, in particular. In addition, the appreciation of the euro in the first
six months of the financial year has had a dampening effect on reported sales
for the period, which showed a decline of 3 per cent compared to the prior year.
At constant rates of exchange, however, sales increased by 1 per cent.
Sept. 2002 Sept. 2001
euro m euro m
Sales 1 784 1 836 - 3%
Cost of sales (635) (644)
Gross margin 1 149 1 192 - 4%
Net operating expenses (964) (939) + 3%
Operating profit 185 253 - 27%
The decline in sales, combined with a slight weakening in the gross margin
percentage as a consequence of the strong Swiss franc, has resulted in a 4 per
cent decline in gross margin for the period.
Operating expenses showed an increase of 3 per cent. This reflects management`s
commitment to limit the rate of growth in operating costs. This growth is a
consequence of further expansion of the Group`s retail network together with
investments in building distribution capacity and after-sales service centres,
particularly in respect of Jaeger-LeCoultre, IWC and A. Lange & Shne in various
territories.
The decline in sales and gross margin percentage for the period, combined with
the increase in operating expenses, resulted in a reduction in operating profit
of 27 per cent.
Sales by product line
Sept. 2002 Sept. 2001
euro m euro m
Jewellery 397 394 + 1%
Watches 847 877 - 3%
Writing instruments 130 129 + 1%
Leather goods 125 138 - 9%
Clothing and other 285 298 - 4%
1 784 1 836 - 3%
Jewellery sales continued to benefit from demand for the jewellery collections
of Cartier, Van Cleef & Arpels and Piaget. Van Cleef & Arpels, in particular,
reported excellent sales growth in the period, albeit from a relatively low
base. Watch sales declined by 3 per cent for the period. In general, sales of
steel and steel and gold watches performed better than precious metal and
jewellery watches. Menswear sales benefited from good sales in the seasonal
collections of Dunhill and Hackett. Chlo also performed well during the period.
Declines within the fragrance and eyewear product categories, largely
attributable to the downturn in travel-related business, negatively impacted the
"clothing and other" category overall.
Sales by region
Sept. 2002 Sept. 2001
euro m euro m
Europe 779 815 - 4%
Asia 667 688 - 3%
Japan 326 337 - 3%
Asia-Pacific 341 351 - 3%
Americas 338 333 + 2%
1 784 1 836 - 3%
Depressed market conditions and a reduction in tourism in Europe have negatively
impacted the Group`s sales in the region, which declined by 4 per cent compared
to the prior year.
Sales in Asia declined by 3 per cent. However, at comparable rates of exchange,
sales in Japan grew by 5 per cent; sales in the rest of the Asia region grew at
a similar rate.
In the Americas, sales increased by 10 per cent in dollar terms with strong
performances by Cartier and Montblanc; on translation into euros, however, sales
in the region grew by 2 per cent.
Sales by distribution channel
Sept. 2002 Sept. 2001
euro m euro m
Retail sales 711 722 - 2%
Wholesale sales 1 073 1 114 - 4%
1 784 1 836 - 3%
Retail sales showed a 2 per cent decline compared to the prior year, whilst
wholesale sales reported a 4 per cent decline. The percentage of retail sales to
total sales increased marginally from 39.3 per cent to 39.9 per cent, reflecting
further investment in the Group`s retail infrastructure. At 30 September 2002,
the Group operated some 540 owned stores with a further 344 operated by external
partners.
Consolidated profit and loss account
The summary profit and loss account as well as the earnings per unit information
set out below is presented on an adjusted basis, excluding the effects of
goodwill amortisation and exceptional items from the results of both periods. A
reconciliation of the profit and loss account on this basis to the result on a
reported basis is presented as an appendix to this announcement.
Sept. 2002 Sept. 2001
euro m euro m
Operating profit 185 253
Net investment expense (16) (26)
Profit before taxation 169 227
Taxation (37) (65)
Profit after taxation 132 162
Minority interests 2 3
Attributable profit of the parent and
its subsidiaries 134 165
Share of attributable profit of associate
- British American Tobacco 270 260
Attributable profit of the Group 404 425
Earnings per unit - basic euro 0.725 euro 0.761
Earnings per unit - fully diluted euro 0.716 euro 0.754
Earnings per unit
Basic earnings per unit is calculated by reference to the weighted average
number of units outstanding during the period of 556.9 million units (2001:
558.2 million units) and the attributable profit of the Group on an adjusted
basis of euro 404 million (2001: euro 425 million) for the period. The number of
units outstanding takes into account the effects of the Group`s unit buy-back
programme.
Fully diluted earnings per unit is calculated by reference to 574.2 million
units outstanding (2001: 574.2 million units) and attributable profit on an
adjusted basis for the period of euro 411 million (2001: euro 433 million) which
reflects the notional additional interest of euro 7 million (2001: euro 8
million) which would have accrued to the company had the full number of units
been outstanding during the period.
Associated company - British American Tobacco
The Group`s 21 per cent share of the results of British American Tobacco
increased by 4 per cent to euro 270 million for the six-month period ended 30
September 2002.
During the six-month period under review, Richemont received a total of euro 258
million in dividends from British American Tobacco. This comprised both the
final dividend in respect of British American Tobacco`s financial year ended 31
December 2001 and the 2002 interim dividend, received during September.
British American Tobacco performed well in the nine-month period to end
September with adjusted diluted earnings per share increasing by 8 per cent from
45.80 pence to 49.47 pence. Sales volumes for the period totaled 579.3 billion
cigarettes, with British American Tobacco`s four global brands Lucky Strike,
Kent, Dunhill and Pall Mall achieving sales growth of 9 per cent.
Profit for the America-Pacific region for the nine-month period showed an
increase of 4 per cent to 769 million. The company`s operations in the United
States increased market share and profit, while strong volume increases in South
Korea more than offset the lower volumes in Canada. Total regional volume was 2
per cent ahead at 80 billion cigarettes.
In Europe a profit increase of 6 per cent to 412 million was achieved, as a
result of solid performances in Germany, Russia, Ukraine, France and
Switzerland, with volumes in line with last year.
In the Asia-Pacific region profit was 5 per cent lower, mainly as a result of
markedly reduced duty-free sales volumes, while in the Africa and Middle East
region the severe devaluation of the South African Rand, the costs incurred in
setting up the new operation in Turkey and lower duty-free sales contributed to
a decrease in profit of 18 per cent to 45 million.
British American Tobacco`s businesses in Latin America performed well in
exceptionally difficult economic circumstances, recording a profit decline of 4
per cent despite the currency devaluations in many countries and a fall in
volume of 6 per cent.
Consolidated cash flow statement
Sept. 2002 Sept. 2001
euro m euro m
Operating profit 185 253
Depreciation and other non-cash items 74 91
Increase in working capital (160) (378)
Net cash inflow / (outflow)
from operating activities 99 (34)
Dividends received from associates 258 228
Returns on investments and servicing of (16) (24)
finance
Taxation paid (56) (117)
Net acquisitions of tangible fixed assets (66) (147)
Buy-back of Richemont units (31) -
Other acquisitions and investments (16) (154)
Net cash inflow / (outflow) before
financing activities 172 (248)
Repayment of long-term borrowings (164) (69)
Dividends paid (178) -
Other financing activities 18 -
Equity contribution by minority - 20
Exchange rate effects 54 23
Decrease in cash, cash equivalents
and short-term borrowings (98) (274)
Cash and cash equivalents at
beginning of period (723) (375)
Cash and cash equivalents at end of period (821) (649)
Net cash inflow from operating activities during the period amounted to euro 99
million, the cash flow from operations being partially offset by an increase in
working capital.
Dividends received from associates reflects the dividends received from British
American Tobacco, being the final dividend in respect of British American
Tobacco`s financial year ended 31 December 2001 and the interim dividend in
respect of the 2002 financial year.
In terms of the Group`s unit buy-back programme, a further 1.6 million units
were acquired during the period at an aggregate cost of euro 31 million.
Dividends paid represents the Group`s appropriation of earnings for the year
ended 31 March 2002, paid on 30 September 2002. In the previous financial year,
the dividend was paid only in October.
Consolidated balance sheet
30 Sept. 2002 31 Mar. 2002 30 Sept. 2001
euro m euro m euro m
Fixed assets
Property, plant and 856 903 779
equipment
Investments in
associated
companies 736 638 616
Other investments 442 470 419
2 034 2 011 1 814
Net working capital 1 952 1 956 1 589
Net operating assets 3 986 3 967 3 403
Goodwill 5 570 5 730 5 910
Net borrowings (1 401) (1 456) (1 255)
Cash, cash equivalents
and short-term
borrowings (821) (723) (649)
Long-term borrowings (580) (733) (606)
Other long-term (184) (176) (158)
liabilities
7 971 8 065 7 900
Capital employed
Unitholders` funds 7 893 7 983 7 810
Minority interests 78 82 90
7 971 8 065 7 900
The increase in investments in associated companies since 31 March 2002
represents the movement in the Group`s share of the net tangible assets of
British American Tobacco.
The carrying value of goodwill decreased during the period as a result of the
amortisation charge.
Changes in unitholders` funds
Sept. 2002 Sept. 2001
euro m euro m
Profit attributable to unitholders on
an adjusted basis 404 425
Goodwill amortisation (196) (192)
Exceptional items reported by
associated company - (18)
Profit attributable to unitholders
on a reported basis 208 215
Dividend declared (178) (168)
Unit based executive compensation
scheme reserve movement (31) 41
Translation and other adjustments (89) (15)
Net increase/(decrease) in
unitholders` funds (90) 73
Unitholders` funds at the
beginning of the period 7 983 7 737
Unitholders` funds at the end
of the period 7 893 7 810
Accounting policies
The interim financial statements have been prepared in accordance with the same
accounting policies as those set out on pages 50 to 53 of the Annual Report for
the year to 31 March 2002.
Swiss Stock Exchange compliance
These interim financial statements comply with the listing rules of the Swiss
Stock Exchange.
Johann Rupert Jan du Plessis
Executive Chairman Group Finance Director
Compagnie Financi
re Richemont SA Geneva, 14 November 2002
Appendix 1
Consolidated profit and loss account on a reported basis
Notes Sept. 2002 Sept. 2001
euro m euro m
Operating profit 185 253
Goodwill amortisation 1 (96) (91)
Profit before net
investment income /
(expense) and taxation 89 162
Net investment expense (16) (26)
Profit before taxation 73 136
Taxation (37) (65)
Profit after taxation 36 71
Minority interests 1 2
Attributable profit of
the parent and its
subsidiaries 37 73
Share of attributable
profit of associates 171 142
Share of attributable
profit on an adjusted
basis 270 260
Goodwill amortisation in
respect of associates (99) (100)
Share of exceptional
items reported by
associates - (18)
Attributable profit of
the Group on
a reported basis 2 208 215
A summary of the effects
of goodwill amortisation
and exceptional items on
profit attributable to
unitholders is shown
below:
Attributable profit of
the Group
on a reported basis 208 215
Elimination of goodwill
amortisation 1 196 192
Reported by the parent
and its subsidiaries 96 91
In respect of associates 99 100
Minority interests 1 1
Elimination of
exceptional items
reported by associated
company - 18
Attributable profit of
the Group on an
adjusted basis 404 425
Note 1 - Goodwill amortisation
The reported results reflect the Group`s accounting policy of amortising
goodwill through the consolidated profit and loss account. The goodwill
amortisation charge at the pre-tax profit level for the six months ended 30
September 2002 was euro 96 million. An additional goodwill amortisation charge
of euro 99 million arises in respect of the Group`s interest in British American
Tobacco. The goodwill amortisation relating to minority interests is in respect
of goodwill arising on the acquisition of Van Cleef & Arpels.
Note 2 - Earnings per unit on a reported basis
Sept. 2002 Sept. 2001
Earnings per unit on a
reported basis - basic euro 0.373 euro 0.385
- fully diluted euro 0.374 euro 0.388
Basic earnings per unit is calculated by reference to the weighted average
number of units outstanding during the year of 556.9 million units (2001: 558.2
million units) and the attributable profit of the Group of euro 208 million for
the period
(2001: euro 215 million). The number of units outstanding takes into account the
effects of the Group`s buy-back programme.
Fully diluted earnings per unit is calculated by reference to
574.2 million units outstanding (2001: 574.2 million units) and attributable
profit for the period of euro 215 million (2001:
euro 223 million) which reflects the notional additional interest of
euro 7 million (2001: euro 8 million) which would have accrued to the company
had the full number of shares been outstanding during the period.
Appendix 2
Exchange rates used in preparation of this report
The results of the Group`s subsidiaries and associates which do not report in
euros have been translated at average rates of exchange against the euro.
Average exchange rates against the euro
6 months to 6 months to
30 Sept. 2002 30 Sept. 2001
Pounds sterling 0.63 0.62
Swiss franc 1.46 1.52
U.S. dollar 0.95 0.88
Japanese yen 116.98 107.81
Closing exchange rates against the
euro 30 Sept. 2002 30 Sept. 2001
Pounds sterling 0.63 0.62
Swiss franc 1.46 1.48
U.S. dollar 0.99 0.91
Japanese yen 120.18 108.43
Notes for South African readers
Acknowledging the interest in Richemont`s results on the part of South African
investors, set out below are key figures from the results of both years
expressed in rand. The average euro/rand exchange rate prevailing during the six
months ended 30 September 2002 was 9.93; this compares with a rate of 7.2512
during the prior year.
Sept. 2002 Sept. 2001
Rand m Rand m
Sales 17 715 13 313 + 33%
Operating profit 1 837 1 835
Attributable profit
- parent and subsidiaries 1 331 1 196 + 11%
- share of associated
companies 2 681 1 885 + 42%
- the Group 4 012 3 082 + 30%
Earnings per depositary
receipt, cents,
(fully diluted basis) 71.1 54.7 + 30%
Richemont Securities AG Depositary 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 Depositary 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 Investor Services Limited.
Richemont Securities AG,
Share Code: RCH
ISIN Code: CH0013157380
Geneva, 14 November 2002
Date: 14/11/2002 09:03:00 AM Produced by the JSE SENS Department
