| Thu 13 Nov 2003, 10:35 | | RICHEMONT - INTERIM RESULTS |
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RICHEMONT - INTERIM RESULTS
RICHEMONT
Richemont Securities AG
Share code: RCH ISIN: CH0013157380
INTERIM RESULTS
Richemont, the Swiss luxury goods group, announces its unaudited results for the
six-month period ended 30 September 2003
September 2003 September 2002
Sales euro 1 526 m euro 1 784 m - 14%
Operating euro 81 m euro 185 m - 56%
profit
Net profit
- parent and euro 68 m euro 134 m - 49%
subsidiaries
- share of euro 221 m euro 270 m - 18%
associated
company
- the Group euro 289 m euro 404 m - 28%
Earnings per euro 0.514 euro - 28%
unit - fully 0.716
diluted
basis
In accordance with the style of presentation used in previous years and for ease
of comparability, these results are presented on an adjusted basis, excluding
the effects of goodwill amortisation in both periods and exceptional items from
the current period in respect of the Group"s investment in its associated
company, British American Tobacco plc.
* Sales in constant currency terms showed a decline of six per cent for the six-
month period under review. Reflecting the strength of the euro, in particular
against the dollar and the yen, sales at actual rates of exchange were 14 per
cent lower than the comparative period.
* In the last four months of the period, sales in constant currency terms grew
by some one per cent, reversing the extremely adverse effects seen in the first
two months of the period as a result of the SARS epidemic and the war in Iraq,
when sales declined by 19 per cent.
* Notwithstanding a decline in operating costs of 12 per cent, operating profit
declined by 56 per cent. Costs in the period included charges of euro 11 million
in respect of restructuring of the Group"s Swiss manufacturing operations, as
announced in June 2003.
* Cashflow from operations was maintained at euro 96 million as a result of
improved working capital management.
* The Group"s equity accounted share of the results of its investment in British
American Tobacco amounted to euro 221 million, some euro 49 million lower than
the comparative period. This was in part due to the lower equity interest in
British American Tobacco as a consequence of the issue of warrants over the
Group"s preference shareholding, combined with currency effects.
Cautionary statement regarding forward-looking statements
This document contains certain forward-looking statements. Various factors may
cause actual results to differ materially in the future from those which may be
communicated in forward-looking statements contained within this report. Readers
are cautioned not to place undue reliance on these forward-looking statements.
The Group undertakes no obligation to publicly revise or update any forward-
looking statements, whether as a result of future events, new information or
otherwise.
EXECUTIVE CHAIRMAN"S COMMENTARY
The six-month period ended 30 September 2003 has been one of the most difficult
in Richemont"s history. This is borne out by the marked decline in sales for the
period, which were some 14 per cent below the prior year"s level. That decline
in sales has had an obvious knock-on effect in terms of profitability, with
operating profit for the period declining by 56 per cent. Richemont has expanded
its cost base in recent years through the development of our in-house
manufacturing capability, through store openings and the creation of the
regional distribution and after-sales service infrastructure. When, as now,
trading conditions are difficult, these investments result in a
disproportionately adverse effect on operating profits. However, these
initiatives do provide the Group with a competitive advantage, which I am
confident will contribute to improved results in the years to come when we see a
return to more normal trading conditions.
The Group"s sales for April and May 2003 suffered from the consequences of the
SARS epidemic, which were most severely felt in the Asia-Pacific region, as well
as the war in Iraq which impacted on tourism generally. Sales in those two
months were down by some 27 per cent overall, with the Asia-Pacific region
showing a decline of 41 per cent. The improvement which began in June has, I am
glad to say, been largely maintained, resulting in the sales for the six-month
period being down by `only" some 14 per cent. Disregarding the effect of the
euro"s strength, at constant exchange rates we have seen modest growth of one
per cent in sales over the latter four months of the period under review.
Security concerns and the after-effects of the SARS crisis, exacerbated by the
strength of the euro, have contributed to the significant downturn in tourism in
Europe, Richemont"s principal market.
There are, however, a number of positives that we can take from the Group"s
experiences over the last six months. Although trading conditions have been
difficult, our teams in each of the maisons have worked hard to respond to the
challenges that they have had to face. New product launches are being
accelerated, product palettes strengthened and, in some cases, broadened in
terms of price points.
In June we announced the restructuring of certain watch manufacturing operations
in Switzerland, a process which will be complete by the end of this year. In
this respect, an euro 11 million charge has been absorbed within operating
expenses in the current period.
From a financial perspective, we have placed great emphasis on limiting the
level of operating expenses and monitoring working capital. Notwithstanding the
restructuring charge of euro 11 million, operating expenses were some 12 per
cent lower than in the comparable period last year. Whilst this reflects to some
extent the beneficial impact of the strength of the euro, we have taken steps to
eliminate unprofitable stores and overhead costs have been closely controlled.
In terms of working capital, Group companies have managed to lower inventories
from the level seen last year and, despite a seasonal increase in debtors, the
Group"s operations have generated a positive cash flow of some euro 96 million,
in line with the level seen in the comparable period last year. This has been
achieved notwithstanding the fact that operating profit is less than half the
prior year"s figure.
At Dunhill and Lancel, the restructuring programmes announced earlier this year
are well advanced. We are committed to re-establishing the Alfred Dunhill brand
to its rightful position as a leading global supplier of leather, clothing and
accessories for men. The change of emphasis to extend wholesale distribution, as
opposed to focussing on Dunhill"s own retail outlets, is moving ahead strongly
with five distribution agreements signed in Europe and an agreement concluded
with Saks, Fifth Avenue for distribution in its stores across the United States.
Lancel is now concentrating on its traditional French market with a strong focus
on product creation and communication. This has involved a major process of
product launches and new marketing campaigns and we look forward to seeing this
maison return to profitability in due course.
Outlook
We are seeing some positive signs in terms of the current trading environment.
Sales in the month of October have continued to show modest growth of one per
cent overall in constant currency terms, albeit with some wide variations from
region to region. We have seen good double-digit growth in sales in local
currency terms in the Asia-Pacific region, the Americas and the Middle East,
although Japan and Europe remain difficult. At actual exchange rates, the
overall growth of one per cent at constant rates in October translated into a
decline of seven per cent.
At this stage, I do not want to predict the likely performance of the Group for
the remainder of the year. All that I can say is that, all other things being
equal, it appears that the worst problems that the luxury goods world has faced
in recent months and years may be behind us. If economic recovery continues and
the world does not face any further crises, we may see the upturn in consumer
confidence gaining further momentum. Within Richemont, we will continue to
manage prudently and I am convinced that the strengths of our maisons, combined
with good financial discipline, will ensure the prosperity of the Group in the
years ahead.
Johann Rupert
Executive Chairman
Geneva, 13 November 2003
BUSINESS REVIEW
Overview
September 2003 September 2002
euro m euro m
Sales 1 526 1 784 - 14 %
Cost of sales (595) (635)
Gross margin 931 1 149 - 19 %
Net operating expenses (850) (964)
Operating profit 81 185 - 56 %
The Group"s sales for the six-month period as a whole declined by 14 per cent.
Sales in the months of April and May were heavily influenced by the SARS crisis
and the war in Iraq. These factors impacted broadly on consumer confidence and
on travel-related business and resulted in a decline of 27 per cent in that
period. In contrast to the severe downturn in sales experienced in April and
May, sales in the remainder of the six-month period have shown an improvement,
increasing by one per cent in constant currency terms. At actual rates, sales in
that period were some seven per cent below the comparative period.
The gross margin percentage declined from 64.4 per cent to 61.0 per cent as a
result of the negative impact of currency movements and the cost implications of
sub-optimal production levels.
In June 2003 the Group announced the restructuring of certain elements of its
Swiss manufacturing operations and, as a result, euro 11 million of
restructuring charges were incurred in the period. These are included in net
operating expenses for the period.
In line with management"s commitment to control costs strictly, operating
expenses declined 12 per cent. Excluding the impact of the restructuring charge
referred to above and the impact of foreign currency movements, underlying
operating expenses declined by some six per cent.
Analysis of sales and profitability by business area
Sales and the operating results of the Group"s four main areas of activity were
as follows:
September September
2003 2002
euro m euro m
Sales
Jewellery maisons 827 986 - 16 %
Specialist watchmakers 366 404 - 9 %
Writing instrument 159 179 - 11 %
manufacturers
Textile, leather and other 174 215 - 19 %
businesses
1 526 1 784 - 14 %
Operating result
Jewellery maisons 155 241 - 36 %
Specialist watchmakers 39 58 - 33 %
Writing instrument 13 24 - 46 %
manufacturers
Textile, leather and other (40) (42) - 5 %
businesses
167 281 - 41 %
Unallocated costs (86) (96) - 10 %
Operating profit 81 185 - 56 %
In the analysis above, those businesses which have a heritage as creators of
high jewellery and jewellery watches - Cartier and Van Cleef & Arpels - are
grouped together as jewellery maisons and all of their product ranges, including
watches and writing instruments, have been reflected in the sales figures for
the segment. The Group"s specialist watchmakers, Jaeger-LeCoultre, Piaget, Baume
& Mercier, IWC, Vacheron Constantin, A. Lange & Sohne and Officine Panerai, are
also grouped together for the purposes of this analysis. Montblanc and
Montegrappa are the Group"s two writing instrument manufacturers, whilst the
heading `textile, leather and other businesses" includes not only Alfred
Dunhill, Lancel, Chloe and Hackett, but also other business activities of the
Group covering such areas as external watch component sales.
The Group"s jewellery businesses faced a difficult period, particularly in their
principal market in Europe. Given the emphasis on the retail business by Cartier
and, in particular, Van Cleef & Arpels, operating profit was inevitably heavily
impacted by the shortfall in sales.
Cartier remains the world"s leading jewellery brand and is a powerful force in
the global market for luxury watches. As Richemont"s largest business, with a
very significant retail presence, it is obviously most exposed to the downturn
in demand that we have seen in recent years. Cartier"s response has been to
further regenerate its product portfolio and to implement a programme to ensure
that new jewellery products and watch models are regularly introduced to the
market.
In terms of jewellery, a number of new lines are being introduced including the
Secrets du Boudoir high jewellery range, the Delices de Goa extension of the
successful Delices line, the Menottes collection and the Charms range, the
latter being priced to appeal to younger customers. In terms of watches the
female versions of the Roadster and Tank Divan are now in the stores as is the
Declaration range for ladies. New leather and fragrance lines are also being
unveiled in the run up to the Christmas season. New store openings, for example
in Madrid, Hong Kong and Berlin, have been opportunities to present these new
product ranges. The opening of the new flagship store on the Champs Elysees in
Paris was a gala occasion, which featured the launch of the Panthere jewellery
collection. In July, Cartier opened its second Tokyo boutique in the Ginza
shopping area. As a destination store, it has already become one of Cartier"s
top boutiques.
Van Cleef & Arpels has continued to build its geographical presence and broaden
its product ranges. A second boutique was opened in Tokyo during the period,
bringing the total number of owned boutiques worldwide to 33. In terms of
products, a new classical jewellery line, Acanthe, and the new Majorelle high
jewellery line were launched during the period, as were new models in the
Alhambra range. The Frivole line of more accessible bijoux pieces was also
launched.
The Group"s specialist watch manufacturers have faced challenging market
conditions. However, in general, recent months have seen an improving trend. The
overall figure masks continuing difficulties in some markets, however, most
notably in Europe. This, of course, impacts principally on those brands which
are less diversified geographically than others. The Salon International de la
Haute Horlogerie in April served as a showcase for new product launches to trade
buyers with new models such as the Spitfire collection from IWC and the Master
Compressor Geographic from Jaeger-LeCoultre being well received. Officine
Panerai also presented new models in the Radiomir and Luminor ranges at the SIHH
and has more recently launched a Radiomir Chrono special limited edition of 230
pieces.
In terms of the Group"s writing instrument manufacturers, Montblanc has also
been active during the first half of the year, with the highly successful
introduction of the new Starwalker range of writing instruments, in either resin
or rubber and metal finishes. New models and special editions in the more
established Meisterstuck and Boheme ranges have also been introduced. Montblanc
continues to build its reputation in terms of watches and leather goods. Its
principal watch manufacturing facility at Le Locle in Switzerland was re-opened
during the period, after the completion of work to extend the production
capacity there. The new Timewalker watch range was introduced at the SIHH in
April and will appear in retailers in November, whilst the Summit range
continued to enjoy great success. In October, Montblanc opened its flagship
North American boutique at 57th Street and Madison Avenue in New York. The
boutique further evidences Montblanc"s transition from a manufacturer of fine
writing instruments to a more broadly-based luxury goods brand.
The decline in sales of the Group"s textile, leather and other businesses
reflects, in part, the decision taken to scale back the Alfred Dunhill and
Lancel retail operations. Alfred Dunhill has focussed on extending its offering
of men"s accessories and watches for wholesale distribution and has enjoyed good
sales of its Sidecar range of leather goods, which was introduced during the
period. New launches scheduled in the run-up to Christmas include extensions to
the existing watch ranges, new writing instruments and lighters as well as new
games, building on the success of the Dunhill luxury editions of Monopoly and
backgammon.
Unallocated costs represent the costs of general management, marketing support
and related central marketing initiatives as well as all central service costs,
such as IT, legal, intellectual property and finance, and other central cost
elements which cannot be allocated to individual business areas.
Details of sales by product line are given in note 2 to the financial
statements.
Sales by region
Movement at:
September September Constant Actual
2003 2002 exchange exchange
euro m euro m rates rates
Europe 671 779 - 12 % - 14 %
Asia 557 667 - 3 % - 16 %
Japan 281 326 - 2 % - 14 %
Asia 276 341 - 4 % - 19 %
Pacific
Americas 298 338 + 5 % - 12 %
1 526 1 784 - 6 % - 14 %
In comparison to the average exchange rates prevailing in the comparative period
in 2002, the euro strengthened by 19 per cent and 14 per cent against the dollar
and the yen, respectively. The table above illustrates the significant impact of
the strength of the euro by contrasting the decrease in sales by region at
actual exchange rates with the movement at constant exchange rates.
Sales in Europe declined by 14 per cent, reflecting the general economic malaise
within this region exacerbated by reduced levels of tourism in key markets such
as France, Italy and Switzerland. Sales on a constant currency basis declined by
12 per cent.
Sales in Japan showed some resilience, decreasing by only two per cent in
constant currency terms. They were however 14 per cent lower on conversion into
euros at actual rates. The Asia-Pacific region was most heavily impacted by the
SARS crisis, showing a 29 per cent decline in sales at constant exchange rates
in April and May. There was a very strong recovery in the latter months of the
period, however, such that, for the six months as a whole, sales on a constant
currency basis were only some four per cent lower than the previous year"s
levels. Sales in mainland China - a market that is growing in significance to
the Group - increased substantially in constant currency terms during the
period.
The Americas region continued to perform well with sales on a dollar basis
increasing by 5 per cent for the period under review. In euro terms however,
sales were 12 per cent below the comparative period.
Sales by distribution channel
September 2003 September 2002
euro m euro m
Retail 610 711 - 14 %
Wholesale 916 1 073 - 15 %
1 526 1 784 - 14 %
As can be seen from the table above, the decline in sales is broad-based and has
impacted fairly evenly on retail and wholesale sales.
The Group"s retail network of owned and franchised points of sale decreased by
56 stores during the period, largely reflecting the previously announced
closures of Alfred Dunhill stores in North America and a number of Lancel
boutiques. Owned stores at 30 September 2003 totalled 538 with franchised points
of sale showing a decrease of 56 stores to 307 outlets. In line with the
continued development of their retail strategy, Montblanc opened 6 internal and
2 franchised boutiques during the period.
Profit and loss account and results of associate
September 2003 September 2002
euro m euro m
Operating profit 81 185
Net investment income/(expense) 8 (16)
Profit before taxation 89 169
Taxation (22) (37)
Profit after taxation 67 132
Minority interests 1 2
Net profit of the parent and its subsidiaries 68 134
Share of results of associated undertaking 221 270
Net profit of the Group 289 404
The Group"s share of the results of British American Tobacco decreased by 18 per
cent for the six-month period ended 30 September 2003. The results for the
period were influenced by the reclassification of the British American Tobacco"s
preference shares following the issue of secured warrants over those shares in
January 2003, which resulted in a change in the accounting treatment applied to
the shares. Consequently, the results for the comparative period incorporate the
Group"s aggregate 21.0 per cent interest in both the ordinary and preference
shares, whereas the current period reflects only the Group"s 19.2 per cent
interest in the ordinary share capital. The movement in the present value for
the preference shares of euro 19 million is accounted for as an element of net
investment income. Further information in respect of the accounting treatment of
the British American Tobacco preference shares is given in note 13 on page 59 of
the Richemont Annual Report 2003.
During the six-month period to 30 September 2003, income from the Group"s 19.2
per cent (2002: 21.0 per cent) holding in British American Tobacco amounted to
euro 221 million, some 18 per cent lower than the comparative period. In
sterling terms, British American Tobacco"s profit for the period was one per
cent below the prior year. Taking into account the Group"s reduced equity and
the 11 per cent weakening of the pound against the euro, the Group"s share of
British American Tobacco"s results was euro 49 million below the prior year"s
level.
In terms of cash flow, Richemont received dividends totaling euro 237 million
from British American Tobacco during the six months under review.
British American Tobacco has a financial year ending on 31 December. The
following commentary is therefore based on British American Tobacco"s interim
and third quarter financial reports.
Operating profit for the nine month period to 30 September, excluding goodwill
amortisation and exceptional items grew by three per cent to GBP 2 115 million,
as volumes grew by one per cent to 584 billion cigarettes, with the four global
drive brands, Kent, Dunhill, Lucky Strike and Pall Mall showing an overall
growth of 13 per cent.
All British American Tobacco regions contributed to the growth in operating
profit with the exception of the America-Pacific region. This region"s profit of
GBP 728 million was down GBP 30 million from last year as the impact of very
difficult trading conditions continuing in the US cigarette business and
exchange rate movements were only partly offset by strong profit increases from
Canada, Japan and South Korea. In the US market, industry profitability was
severely affected by continued competitive pricing and promotional activities,
as well as industry volumes down seven per cent due to state excise tax
increases and lower wholesale inventory levels.
In Asia-Pacific, regional profit rose by GBP 9 million to GBP 358 million, with
outstanding performances in Australia, Malaysia, Vietnam and India, partially
offset by reduced profit from Cambodia, Indonesia and duty free.
In Latin America, profit of GBP 335 million was GBP 19 million higher with
increased contributions from many markets in the region and a first time
contribution from the acquisition in Peru. The excellent regional results were
achieved despite the difficult economic conditions in many of the countries and
the impact of currency devaluations compared to last year.
Excluding restructuring costs in the UK, operating profit in Europe was up GBP
29 million to GBP 444 million, as lower marketing costs in the UK and
significantly higher profits in Russia, Hungary and Netherlands, as well as the
strengthening of the euro, more than offset lower profit from France.
In the Africa and Middle East region, profit at GBP 250 million was up by GBP 43
million, despite the costs of continuing investments in building the business in
Turkey, reflecting generally good performances and the impact of the strong
South African rand.
British American Tobacco"s adjusted diluted earnings per share grew five per
cent in the nine months to September 2003 to 51.47p as higher operating profits
and the benefits from the share buy-back programmes more than offset the
increases in net interest paid and the minority interest charge.
During the period under review, British American Tobacco has announced proposals
to restructure certain of its businesses. These included the consolidation of
manufacturing operations in the UK and a major restructuring of the business in
Canada. British American Tobacco"s results for the nine-month period to 30
September 2003 included an exceptional charge of GBP 302 million in respect of
the costs associated with these restructuring activities. In addition, the
company incurred a loss on disposal of a US subsidiary totalling GBP 62 million.
British American Tobacco has also been active in terms of acquiring businesses,
having acquired a controlling interest in Peru"s leading tobacco company
Tabacalera Nacional S.A.A., having made a successful bid (subject to European
Commission approval) for the Italian state tobacco company Ente Tabacchi
Italiani S.p.A. and having bought a 67.8 per cent holding in the Serbian tobacco
company Duvanska Industrija Vranje.
In addition, in October 2003, British American Tobacco announced an agreement to
combine its US subsidiary Brown & Williamson"s domestic business with RJ
Reynolds (RJR) to form Reynolds American, a new holding company to be 58 per
cent owned by RJR shareholders and 42 per cent owned by British American
Tobacco. British American Tobacco also announced that it would sell its US
smoking tobacco and cigar business to Reynolds American for US$.400 million in
cash. Reynolds American will have a combined share of some one third of the US
domestic market.
Cash flow
September September
2003 2002
euro m euro m
Operating profit 81 185
Depreciation and other non-cash items 63 74
Earnings before interest, tax and depreciation 144 259
Increase in working capital (48) (160)
Cash generated from operations 96 99
Dividends received from associate 237 258
Returns on investments and servicing of finance - (16)
Taxation paid (19) (56)
Net acquisitions of fixed assets (31) (66)
Other acquisitions (12) (18)
Proceeds on disposal of other long-term assets 44 2
Net cash inflow before financing activities 315 203
Dividend paid to unitholders (176) (178)
Buy-back of Richemont units - (31)
Repayments of long-term borrowings (100) (164)
Other financing activities (1) 18
Exchange rate effects 22 54
Increase / (decrease) in cash, cash equivalents and 60 (98)
short-term borrowings
Cash and cash equivalents at the beginning of period (744) (723)
Cash and cash equivalents at the end of period (684) (821)
Long-term borrowings (334) (580)
Net borrowings (1 018) (1 401)
The net cash inflow from operations totalled euro 96 million for the period,
broadly in line with the prior period, the reduction in profitability being
offset by a significantly lower increase in working capital. The increase in
working capital, totalling euro 48 million, was principally due to the seasonal
increase in trade debtors, partially offset by a decrease in inventories.
Dividends received from British American Tobacco comprise the final dividend in
respect of British American Tobacco"s financial year ended 31 December 2002 and
the interim dividend in respect of the Group"s effective interest in BAT
ordinary shares for the 2003 financial year. The BAT interim dividend in respect
of the preference shares, amounting to euro 14 million, is included within
"returns on investments and servicing of finance", wholly offsetting the net
interest expense for the period.
The dividend paid in the current period represents the dividend paid by
Richemont SA on its participation certificates for the year ended 31 March 2003.
Acquisitions of fixed assets totalled euro 60 million (2002: euro 74 million).
Disposals during the period resulted in a net figure of euro 31 million (2002:
euro 66 million) for the six month period.
The proceeds on disposal of other long-term assets include euro 37 million
representing the sale of the Group"s remaining interest in Hanover Direct.
Summarised balance sheet
30 September 31 March
2003 2003
euro m euro m
Long-term assets
Fixed assets 764 801
Investment in associated undertaking - BAT 2 498 2 590
Other long-term assets 318 1 128
3 580 4 519
Net current assets 2 396 1 851
Net operating assets 5 976 6 370
Net borrowings (1 018) (1 177)
Cash 164 150
Bank loans and overdrafts (848) (894)
Short-term portion of long-term loans and (68) (23)
finance leases
Long-term borrowings (266) (410)
Other long-term liabilities (148) (195)
4 810 4 998
Equity
Unitholders" funds 4 807 4 992
Minority interests 3 6
4 810 4 998
Following the change in accounting policy detailed in the March 2003
consolidated financial statements, the Group accounts for goodwill arising on
the acquisition of subsidiary undertakings as a deduction from equity.
Comparative figures within this report have been restated to accord with this
new policy. Further details are presented in note 1 to the abridged financial
statements which follow.
In January 2003, the Group issued call warrants over its remaining interest in
British American Tobacco"s preference shares. Accordingly, the Group ceased to
equity account for its investment in the preference shares of British American
Tobacco from that date and those shares were reclassified as a long-term asset.
Due to the maturity of the warrants in June 2004 and the conversion or
redemption of the preference shares at that time, the total carrying value of
the preference shares amounting to euro 801 million (31 March 2003: euro 810
million), which was previously included in other long-term assets, has now been
reclassified as an "asset held for resale" within net current assets. The
carrying value of the secured call warrants of euro 22 million have therefore
also been reclassified to current liabilities.
Johann Rupert Jan du Plessis
Executive Chairman Group Finance Director
Compagnie Financiere Richemont SA
Geneva, 13 November 2003
RICHEMONT
ABRIDGED CONSOLIDATED FINANCIAL STATEMENTS
AT 30 SEPTEMBER 2003
UNAUDITED
Comparative figures within these financial statements have been restated, where
necessary, to reflect the change in accounting policy in respect of goodwill
arising on the acquisition of subsidiary undertakings implemented for the first
time in the Group"s financial statements for the year ended 31 March 2003.
Further details of the change in accounting policy are given in note 1 to these
abridged financial statements.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 30 SEPTEMBER 2003
September September
2003 2002
restated
Notes euro m euro m
Sales 2 1 526 1 784
Cost of sales (595) (635)
Gross profit 931 1 149
Net operating expenses 3 (850) (964)
Operating profit 81 185
Net investment income/(expense) 4 8 (16)
Profit before taxation 89 169
Taxation (22) (37)
Profit after taxation 67 132
Minority interests 1 2
Share of results of associated undertaking 5 51 171
Net profit 119 305
Earnings per unit 6 euro euro
Earnings per unit on a reported basis - 0.216 0.548
basic
Earnings per unit on a reported basis - 0.218 0.543
fully diluted
A summary of net profit, adjusted to exclude the effects of goodwill
amortisation and exceptional items, is set out below:
September September
2003 2002
restated
Note euro m euro m
Net profit 119 305
Goodwill amortisation in respect of associated 84 99
undertaking
Exceptional items reported by associated 86 -
undertaking
Net profit on an adjusted basis 289 404
Earnings per unit 6 euro euro
Earnings per unit on an adjusted basis - basic 0.525 0.725
Earnings per unit on an adjusted basis - fully 0.514 0.716
diluted
CONSOLIDATED BALANCE SHEET AT 30 SEPTEMBER 2003
September March September
2003 2003 2002
restated
Notes euro m euro m euro m
Long-term assets
Property, plant and equipment 704 735 804
Intangible assets 60 66 52
Deferred tax assets 137 137 80
Investment in associated 7 2 498 2 590 3 222
undertaking
Other long-term assets 8 181 991 362
3 580 4 519 4 520
Net current assets
Inventories 9 1 508 1 604 1 752
Debtors 10 1 596 950 826
Cash 164 150 191
Current assets 3 268 2 704 2 769
Current liabilities 11 (1 437) (1 421) (1 922)
Current tax liabilities (82) (76) (16)
Provisions (105) (123) (46)
1 644 1 084 785
5 224 5 603 5 305
Equity
Share capital 334 334 334
Participation reserve 645 645 645
Unitholders" capital 979 979 979
Retained earnings and other 3 828 4 013 3 863
reserves
Unitholders" funds 4 807 4 992 4 842
Minority interests 3 6 45
4 810 4 998 4 887
Long-term liabilities
Borrowings 266 410 234
Secured call warrants - 37 -
Provisions 55 53 68
Post-retirement and other benefit 78 83 55
obligation
Deferred tax liabilities 15 22 61
414 605 418
5 224 5 603 5 305
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD ENDED 30 SEPTEMBER 2003
September 2003 September 2002
Note euro m euro m
Cash generated from operations 12 96 99
Interest income and similar items 16 6
Interest paid and similar items (16) (22)
Dividends from associated 237 258
undertaking
Taxation paid (19) (56)
Net cash inflow from operating 314 285
activities
Investing activities
Acquisition of property, plant (59) (67)
and equipment
Proceeds from disposal of 28 -
property, plant and equipment
Acquisition of intangible assets (1) (7)
Proceeds from disposal of 1 8
intangible assets
Acquisitions of subsidiary
undertakings
and minority interests, net of (3) (1)
cash acquired
Acquisitions of other long-term (9) (17)
assets
Proceeds from disposals of other 44 2
long-term assets
Net cash generated/(absorbed) in 1 (82)
investing activities
Net cash inflow before financing 315 203
activities
Financing activities
Repayments of long-term (100) (164)
borrowings
Dividend paid on Richemont SA (176) (178)
participation reserve
Buy-back of Richemont units - (31)
Other (1) 18
Net cash used in financing (277) (355)
activities
Net cash inflow/(outflow) after 38 (152)
financing activities
Effects of exchange rate 22 54
movements
Net increase/(decrease) in cash 60 (98)
and cash equivalents
Cash and cash equivalents at (744) (723)
beginning of period
Cash and cash equivalents at end (684) (821)
of period
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 SEPTEMBER 2003
Reserve Translation
Share Participation for and other
unit
capital reserve buy- reserves
back
euro m euro m euro m euro m
Balance at 1 April 2003 334 645 (513) (136)
Movements in the period to 30
September 2003
Exchange adjustments - - - (130)
Cash flow hedges - fair value gains - - - 10
Purchase of minority interests - - - -
Net profit - - - -
Dividend paid on Richemont SA
participation reserve - - - -
Other - - - -
Balance at 30 September 2003 334 645 (513) (256)
Consolidated statement of changes in equity
for the period ended 30 September 2003 (continued)
Unitholders"
Retained funds Minority
earnings total interests Total
euro m euro m euro m euro
m
Balance at 1 April 2003 4 662 4 992 6 4 998
Movements in the period to
30 September 2003
Exchange adjustments (6) (136) - (136)
Cash flow hedges - fair - 10 - 10
value gains
Purchase of minority - - (2) (2)
interests
Net profit 119 119 - 119
Dividend paid on Richemont
SA
participation reserve (176) (176) - (176)
Other (2) (2) (1) (3)
Balance at 30 September 4 597 4 807 3 4 810
2003
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT 30 SEPTEMBER 2003
Accounting policies and basis of preparation
The financial statements comprise the unaudited results for the six months ended
30 September 2003 and 30 September 2002 together with extracts from the audited
financial statements at 31 March 2003. Certain comparative figures at 30
September 2002 have been restated to accord with the change in accounting policy
set out in note 1 below.
The unaudited financial statements have been prepared in accordance with the
Swiss Generally Accepted Accounting Principles as issued by the Foundation for
Accounting and Reporting Recommendations in Switzerland using the accounting
policies set out in the consolidated financial statements for the year ended 31
March 2003. These interim financial statements comply with ARR 12 - Presentation
of Interim Statements. Where necessary, estimates have been used in the
preparation of these financial statements. In particular, the rate used in the
computation of the taxation charge for the period reflects the taxation rate for
the full financial year as anticipated at the date of preparation of these
financial statements.
The financial statements are presented in millions of euros, which represents
the measurement currency of the Group.
Note 1 - Change in accounting policy
In the year ended 31 March 2003, the Group changed its accounting policy with
respect to goodwill arising on the acquisition of subsidiary undertakings, which
is now deducted immediately from unitholders" funds at the time of acquisition.
This policy has been applied retrospectively and comparative figures restated
accordingly.
The impact of this change in accounting policy on the profit and loss account,
earnings per unit, retained earnings and other reserves and goodwill is shown
below:
Impact of
30 Sept 2002 change in
as previously accounting 30 Sept 2002
reported policy as restated
euro m euro m euro m
Impact of restatement on
prior year profit and
loss account
Operating profit 185 - 185
Goodwill amortisation (96) 96 -
Profit before net 89 96 185
investment expense and
taxation
Net investment expense (16) - (16)
Profit before taxation 73 96 169
Taxation (37) - (37)
Profit after taxation 36 96 132
Minority interests 1 1 2
Share of results of 171 - 171
associated undertaking
Net profit 208 97 305
Impact of restatement on euro euro euro
earnings per unit
Earnings per unit on a 0.373 0.175 0.548
reported basis - basic
Earnings per unit on a 0.374 0.169 0.543
reported basis - fully
diluted
Note 1 - Change in accounting policy (continued)
Impact of
30 Sept 2002 change in
as previously accounting 30 Sept 2002
reported policy as restated
euro m euro m euro m
Impact of restatement on
retained earnings and
other reserves
Balance at 1 April 2002 7 004 (3 138) 3 866
Exchange and other (84) - (84)
adjustments
Profit for the period 208 97 305
Goodwill deducted from - (10) (10)
unitholders" funds
Dividend paid (178) - (178)
Movement in hedging (5) - (5)
reserve
Movement in reserve for (31) - (31)
unit buy-back
Balance at 30 September 6 914 (3 051) 3 863
2002
Impact of restatement on
minority interests
Balance at 1 April 2002 82 (32) 50
Loss for the period (1) (1) (2)
Acquisition of minority (3) - (3)
interests
Balance at 30 September 78 (33) 45
2002
Impact of restatement on
goodwill
Balance at 1 April 2002 3 170 (3 170) -
Amortisation for the (96) 96 -
period
Other movements 10 (10) -
Balance at 30 September 3 084 (3 084) -
2002
In accordance with the disclosure requirements of Swiss GAAP ARR 9 - Intangible
Assets, if the Group had not changed its accounting policy, the amounts
presented in the consolidated financial statements relating to the
capitalisation and amortisation of goodwill on acquisition of subsidiary
undertakings would have been:
euro m
Cost at 1 April 2003 3 682
Exchange adjustments (3)
Additions 2
Cost at 30 September 2003 3 681
Accumulated amortisation at 1 April 2003 657
Exchange adjustments (1)
