| Thu 18 Nov 2004, 9:31 | | INTERIM RESULTS |
|
RICHEMONT SECURITIES AG - UNAUDITED INTERIM RESULTS FOR THE SIX-MONTH PERIOD
ENDED 30 SEPTEMBER 2004
RICHEMONT SECURITIES AG
(Incorporated in Switzerland)
Share code: RCH
ISIN: CH0013157380
(`Richemont`)
UNAUDITED INTERIM RESULTS FOR THE SIX-MONTH PERIOD ENDED 30 SEPTEMBER 2004
Richemont, the Swiss luxury goods group, announces its unaudited results for
the six-month period ended 30 September 2004
Profit and loss account on an adjusted basis
September 2004 September 2003
Sales EUR 1 739 m EUR 1 526 m + 14 %
Operating profit EUR 208 m EUR 81 m + 157 %
Net profit
- parent and subsidiaries EUR 173 m EUR 68 m + 154 %
- share of associated
company EUR 238 m EUR 221 m + 8 %
- the Group EUR 411 m EUR 289 m + 42 %
Earnings per unit - fully
diluted basis EUR 0.743 EUR 0.524 + 42 %
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 and exceptional items in both
periods in respect of the Group`s investment in its associated company, British
American Tobacco plc.
Richemont has enjoyed a significant improvement in demand during the
six-month period. Growth in sales of 22 per cent in April and May 2004 more
than offset the sharp decline seen in 2003 as a consequence of the SARS
epidemic. This growth was complemented by growth of some 10 per cent in
sales in the latter part of the period such that, for the 6 month period
overall, sales grew by 14 per cent at actual exchange rates.
Operating profit increased to EUR 208 million, reflecting the growth in
sales and improved margins resulting from higher manufacturing capacity
utilisation and the close monitoring of operating expenses.
Cash flow from operations amounted to EUR 105 million. In addition, the
Group received EUR 1 100 million in respect of its investment in British
American Tobacco by way of dividends and the proceeds from the disposal of
its interest in BAT preference shares. In consequence, net cash at the end
of September amounted to EUR 203 million compared to net debt at 31 March
2004 of EUR 794 million.
The Group`s share of the results of British American Tobacco amounted to
EUR 238 million, an increase of 8 per cent. The increase primarily reflects
underlying profit growth and the strength of sterling against the euro,
which more than compensated for the Group`s lower effective interest in the
company during the period.
On a comparative basis, adjusted net profit increased by 42 per cent to EUR
411 million. After taking into account goodwill amortisation and
exceptional items in respect of the Group`s interest in British American
Tobacco, net profit on a reported basis in accordance with Swiss generally
accepted accounting principles increased from EUR 119 million to EUR 581
million for the period.
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 or to revise, any forward-looking statements.
EXECUTIVE CHAIRMAN`S COMMENTARY
The improvement in Richemont`s results for the first half of the year is
indicative of the strength of the Group`s underlying businesses. There has been
a significant recovery in demand in those markets which showed the biggest
downturn last year, specifically the Asia-Pacific region, and we have seen
good growth in the Americas and in Europe.
Cartier, the Group`s leading Maison, once again has good momentum in terms of
new products. New product launches during the period and a broader product
offering have resulted in both higher sales and profitability. Richemont`s
specialist watch brands have also performed well. In particular, the three
businesses acquired in 2000 - IWC, Jaeger-LeCoultre and A. Lange & Sohne - are
now making significant progress in important markets where they were previously
under-represented.
Montblanc`s strategy of product diversification, linked to the expansion of its
retail activity, continued to deliver good growth in sales and profitability
during the period.
At Alfred Dunhill, the focus on leather, accessory and gift lines is bearing
fruit, as is the expansion of the wholesale business. Operating losses have
therefore been reduced. During the period, sales in the Asia-Pacific region,
which is important to the Maison, recovered and Alfred Dunhill is building its
distribution network in China.
Lancel is still in a process of transition. Whilst the international retail
network has been scaled back, wholesale distribution outside France has been
expanded and Lancel will work with retail partners in China, the United States
and Japan to grow its businesses in these markets.
We have seen a good performance from the Group`s investment in British American
Tobacco and Richemont is now debt-free, having received the proceeds of the
disposal of its interest in the BAT preference shares.
Outlook
I am pleased to be able to report that the trend of growing sales has continued
into the month of October, with overall growth of 8 per cent for the month.
Europe and the Asia-Pacific region reported good results, although growth in
the United States slowed somewhat.
Richemont`s Maisons are, in general, very strongly positioned in their
respective markets. They are better prepared than ever before to meet
competitive challenges, can respond more flexibly and have outstanding
products. Equally, Richemont now has a very strong balance sheet and good cash
generation.
Assuming a continuation of the trends that we have seen in recent months, we
believe that the Group should enjoy a strong pre-Christmas season, albeit
recognising that comparative figures for the quarter to 31 December 2003
already showed an improving trend in sales. Acknowledging that the Group`s
performance in the previous financial year was disappointing, we anticipate
a significant improvement in operating profit for the current year.
Nonetheless, we live in very difficult and volatile times and these
expectations are, of course, predicated upon there being no events which
might adversely impact consumer confidence in the months ahead.
Johann Rupert
Executive Chairman
Geneva, 18 November 2004
BUSINESS REVIEW
Overview
September 2004 September 2003
EUR m EUR m
Sales 1 739 1 526 + 14 %
Cost of sales (625) (595)
Gross margin 1 114 931 + 20 %
Net operating expenses (906) (850)
Operating profit 208 81 + 157 %
Sales in the period increased 14 per cent to EUR 1 739 million. This includes
the exceptional growth seen in April and May this year, when sales increased by
23 and 21 per cent, respectively, reflecting the impact of SARS in the
comparative period. The improvement in sales continued, albeit at a more
moderate rate, for the latter four months of the period.
The gross margin percentage increased three percentage points to 64 per cent,
largely due a higher utilisation rate in the Group`s manufacturing facilities
and to changes in the product mix. Price increases also positively influenced
the gross margin percentage, more than compensating for the weaker dollar
during the period.
Net operating expenses increased by 7 per cent, reflecting a planned increase
in communication expense, linked to the launch of new products, as well as
modest growth in administration expenses. In the absence of any material,
unusual charges in either period, operating profit more than doubled to EUR
208 million, representing an operating margin of 12 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 2004 September 2003
EUR m EUR m
Sales
Jewellery Maisons 922 827 + 11 %
Specialist watchmakers 431 366 + 18 %
Writing instrument manufacturers 186 159 + 17 %
Leather and accessories Maisons 118 113 +4 %
Other businesses 82 61 + 34 %
1 739 1 526 + 14 %
Operating result
Jewellery Maisons 215 155 + 39 %
Specialist watchmakers 73 39 + 87 %
Writing instrument manufacturers 17 13 + 31 %
Leather and accessories Maisons (25) (26) +4 %
Other businesses (1) (11) + 64 %
279 170
Unallocated costs (71) (89) - 20 %
Operating profit 208 81 + 157 %
In the table above, those Maisons which are principally engaged in a specific
business area have been grouped together. Accordingly, 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 results for that segment.
Sales by the Jewellery Maisons increased by 11 per cent overall. Very strong
growth in both the Asia-Pacific and Americas regions was partly offset by
slower growth rates in both Europe and Japan. During the period, Cartier
benefited from the launch of its new watch and jewellery offerings, including
the Santos 100 and Santos Dumont watch models, and from increased demand for
the established Santos range. The Panthere jewellery range, launched worldwide
in April 2004, complemented the success of the Secrets du Boudoir range
launched last November. Van Cleef & Arpels` continuing growth follows the
launch of new products such as Hawaii, and the effects of boutique openings.
For the segment as a whole, the sales increase and continuing cost control have
generated an operating profit of EUR 215 million and an operating margin of 23
per cent, 4 percentage points above the comparative period last year.
The Group`s specialist watchmakers reported an 18 per cent increase in sales
and an increase in the operating margin from 11 per cent in the comparative
period to 17 per cent. The growth was evident in all regions, reflecting the
strong underlying demand for their products and the continued expansion of
their businesses into new territories. Jaeger-LeCoultre, IWC and A. Lange &
Sohne all reported sales growth of some 20 per cent, as did Piaget, which is
celebrating its 130th anniversary with a travelling exhibition of unique
pieces. Piaget launched many new products at the Salon International de Haute
Horlogerie (`SIHH`) in Geneva and its Possession line is being refreshed with
new models. IWC launched its Aquatimer at the 2004 SIHH; this has been a great
success, aided by effective public relations events. Baume & Mercier is
benefiting from an aggressive campaign featuring a mixture of new and
redesigned models. The distribution of A. Lange & Sohne products remains very
tightly controlled, recognising the limited output of this most exclusive
brand. Jaeger-LeCoultre is performing very well; recent developments include a
new boutique in Hong Kong and an innovative partnership with Aston Martin.
Panerai saw strong sales growth in the Americas and Asia-Pacific and the
launch of further special edition models and extensions to the Radiomir line.
Vacheron Constantin also benefited from the improved trading climate,
particularly in the Asia-Pacific region and saw the opening of its new
production facility at Plan-les-Ouates in Geneva. The Maison is preparing to
celebrate its 250th anniversary in 2005.
Richemont`s writing instrument manufacturers, Montblanc and Montegrappa,
reported total sales growth of 17 per cent. In terms of products, sales of the
Meisterstuck range remain strong and have been complemented by the success of
new models such as the Starwalker. The impact of boutique openings, which
ensure the full range of this Maison`s diversified products can be presented,
can be seen in sales growth and improved awareness in the market. As a result,
retail sales, accounting for some 30 per cent of sales, are now growing
significantly faster than sales through the wholesale network. Although an
increase in the number of owned stores increases the value of sales and gross
margin, it also impacts operating expenses. Nevertheless, the segment`s
operating margin increased from 8 per cent in the comparative period to 9 per
cent in the period under review.
In terms of Leather and Accessories Maisons, Alfred Dunhill`s sales have
increased in line with expectations, particularly in the brand`s key Asian
markets where sales were very low in the comparative period. Lancel`s sales
have been affected by the temporary closure of its Paris flagship store for
refurbishment and the closure of its own stores in Japan, where it will in
future work with retail partners.
Nevertheless, Lancel`s rollout in developing markets, in particular China, is
generating encouraging results, and new product developments are effectively
repositioning this established Maison.
The `Other businesses` segment includes Chloe, Hackett, Purdey and Old England
as well as certain watch component manufacturing activities. The inclusion of
these smaller businesses in one segment recognises the disparity in size
between them and the Group`s larger operations. These Maisons are still in a
developmental phase, albeit that some - for example Chloe - are growing
rapidly. Sales for the period increased by 34 per cent, with particularly
strong growth in the Asia-Pacific region and Japan. Increased sales and the
consequent increase in gross margin has resulted in significantly lower
operating losses.
Operating profit before unallocated costs totalled EUR 279 million, an increase
of 64 per cent over the comparative period. This reflects the increase in
sales, a higher gross margin contribution and continuing cost control. As a
result, the operating margin before unallocated costs increased from 11 per
cent to 16 per cent. Unallocated costs represent the costs of central
management, marketing support and related central marketing initiatives as well
as any central service costs that cannot be directly allocated to segments.
Unallocated costs in the prior year included certain provisions, the
non-recurrence of which contributed to the reduction of 20 per cent. The
improvement in the trading result, together with the reduction in unallocated
costs, has resulted in an improvement in the operating profit margin from 5 per
cent to 12 per cent.
Details of sales by product line are given in note 1 to the abridged financial
statements.
Sales by region
Movement at:
Constant Actual
September 2004 September 2003 exchange exchange
EUR m EUR m rates rates
Europe 735 671 +9 % + 10 %
Japan 300 281 +7 % +7 %
Asia-Pacific 360 276 + 38 % + 30 %
Americas 344 298 + 24 % + 15 %
1 739 1 526 + 17 % + 14 %
Sales in European markets increased by 10 per cent, reflecting signs of a
recovery in tourism and a modest improvement in some of the region`s domestic
economies. Sales in the important French and Italian markets increased by 10
per cent and 9 per cent respectively, while smaller developing markets, such as
the Middle East and Russia, recorded very strong rates of growth.
In Japan, sales growth was 7 per cent for the period. Alfred Dunhill, Montblanc
and certain of the watch brands, notably IWC, Panerai and Vacheron Constantin,
have enjoyed good growth. Cartier also benefited from the good growth in watch
sales in that market, although jewellery sales were marginally below
expectations.
Sales in the Asia-Pacific region were well ahead of the comparative period,
which was heavily impacted by SARS. At EUR360 million, sales in the region are
above those of two years ago. At actual exchange rates, sales in Hong Kong and
China increased by 40 per cent and 55 per cent, respectively.
China today is still a small market for the Group, representing 2 per cent of
sales, but it is being successfully developed and obviously has enormous
potential. During the period, two major exhibitions were staged in China by
Richemont. In May, Cartier presented historic pieces from the Cartier
Collection to over 280 000 visitors in Shanghai, whilst September saw the
Group`s watch brands - together with Cartier - present Montres et Merveilles
(`Watches and Wonders`), an expression of the art of watchmaking over the
centuries. The exhibition was staged with the support of the Chinese government
in the Tiao Miao temple in the Forbidden City in Beijing over a period of five
days. Invitations were limited to watch connoisseurs, opinion formers and the
media, to introduce the concept of high watchmaking to the Chinese market.
Sales growth in the Americas region reflected the strength of consumer
confidence in the United States during the period. Cartier reported very strong
growth in the region and the performance of the Group`s watch businesses
exceeded expectations, generating growth of some 26 per cent at historic rates.
Sales by distribution channel
September 2004 September 2003
EUR m EUR m
Retail 671 610 + 10 %
Wholesale 1 068 916 + 17 %
1 739 1 526 + 14 %
Driven by demand for the Group`s watch products in particular, wholesale sales
during the period under review were particularly strong, showing an overall
increase of 17 per cent. Retail sales too showed good growth over the period.
The Group`s retail network of owned and franchised points of sale increased by
27 in the period to 892; of the increase, 9 stores were opened by the Group and
18 by partners. Overall, the Group`s Maisons owned 561 boutiques, with a
further 331 points of sale being operated by franchise partners.
Whereas Cartier`s investments were primarily in the refurbishment of existing
stores, including the rue de la Paix flagship boutique in Paris, other Maisons
expanded their retail networks during the period. Montblanc opened 14 stores in
the period and closed 3 others. Alfred Dunhill`s franchise network increased by
11 boutiques overall, with China accounting for most of the increase. Lancel`s
owned network decreased by 4 to 66 boutiques, reflecting its withdrawal from
own-store retail activities in Japan.
Profit and loss account and results of associate
September 2004 September 2003
EUR m EUR m
Operating profit 208 81
Net investment income 3 8
Profit before taxation 211 89
Taxation (38) (22)
Profit after taxation 173 67
Minority interests - 1
Net profit of the parent and its subsidiaries 173 68
Share of results of associated undertaking 238 221
Net profit of the Group 411 289
Net investment income reflected the Group`s net positive cash position from
June, when the proceeds of the BAT preference shares were received. Whilst cash
balances are held centrally in euros, local currency strategic borrowings are
in place in euros, dollars, yen and Swiss francs with the objective of
partially hedging the Group`s balance sheet exposures.
The Group`s effective taxation rate decreased to 18 per cent, reflecting the
anticipated full year rate. As a result of the completion of a programme to
integrate operations, wherever feasible, the Group is now more efficiently
structured. With its headquarters and a large element of its manufacturing
operations based in Switzerland, the Group also benefits from the comparatively
low rate of corporate taxes applied in its home country.
Associated company - British American Tobacco (`BAT`)
For the six-month period ended 30 September 2004, the Group`s share of the
results of BAT increased by 8 per cent to EUR 238 million.
The results for the period reflect a 19.7 per cent interest in BAT`s results
for the period up to the conversion of the BAT preference shares into ordinary
shares at the beginning of June 2004, at which time its interest was diluted
to 18.6 per cent. Subsequent share buy-backs by BAT resulted in Richemont`s
percentage holding rising to 18.7 by the period end. This compares to the
Group`s 19.2 per cent share of BAT`s results for the six months ended 30
September 2003.
The increased contribution from BAT for the period was due, in part, to the 4
per cent appreciation of sterling against the euro and, in part, to an
underlying increase in BAT`s sterling-denominated profit, partially offset by
the Group`s reduced percentage interest compared to the prior year.
In cash flow terms, during the six months under review, Richemont received EUR
828 million on 4 June 2004 in respect of its holding of the preference shares
as well as dividends on the ordinary shares totalling EUR 239 million.
Richemont also received a final dividend on the preference shares of EUR 33
million in April 2004.
As BAT has a 31 December financial year-end, the following commentary is
condensed from BAT`s third quarter financial report for the nine months to 30
September 2004.
BAT announced on 27 October 2003 and completed on 30 July 2004 the agreement to
combine Brown & Williamson`s (`B&W`) US domestic businesses with R.J. Reynolds
(`RJR`) under Reynolds American Inc., a new holding company 58 per cent owned
by RJR shareholders and 42 per cent by BAT, through B&W.
BAT also sold Lane, its US-based pipe and smoking tobacco business, to Reynolds
American for US$ 400 million in cash.
Operating profit for the nine months before charging goodwill amortisation and
exceptional items was 1 per cent higher at GBP 2 138 million, with results being
adversely affected by the translation into sterling. At comparable rates of
exchange, operating profit would have risen 7 per cent, benefiting from the
acquisition of Ente Tabacchi Italiani S.p.A. and good performances in all
regions except America-Pacific.
BAT`s group sales volumes grew by 6 per cent to 618 billion, driven largely by
acquisitions and the impact of the Reynolds American transaction. The four
global drive - brands Kent, Dunhill, Lucky Strike and Pall Mall - improved in
the third quarter, up 3 per cent, and for the nine months grew slightly, after
being somewhat lower than last year in the first six months.
There were good performances from all of BAT`s regions except America-Pacific.
This region`s profit of GBP 600 million was down GBP 125 million from the same
period last year, with decreases in Japan and Canada, further accentuated by
the translation of US and Canadian results into sterling. Volumes in the region
were up 13 per cent to 87 billion, mainly as a result of the creation of
Reynolds American, with higher volumes from South Korea but declines in Canada
and Japan.
In Asia -Pacific, regional profit rose by GBP 37 million to GBP 395 million,
with strong performances in Australia, Pakistan, Malaysia, India and the duty-
free business. Regional volumes at 151 billion were 5 per cent higher than last
year, with increases in India, Vietnam, Pakistan and Bangladesh partially offset
by declines in Indonesia and Malaysia.
In Latin America, profit of GBP 311 million was GBP 20 million lower as the
general weakening of exchange rates against sterling affected favourable results
in local currency. Regional volumes of 109 billion were slightly lower than last
year as increases in Venezuela and Central America and the impact of the
acquisition in Peru were offset by declines in Brazil, Mexico and Argentina.
In Europe, profit increased by GBP 120 million to GBP 564 million, principally
driven by the acquisition of Ente Tabacchi Italiani S.p.A. The benefits from
cost savings following the closure of factories in the United Kingdom and
Benelux, as well as good results in a number of markets, were largely offset by
markets where excise increases resulted in lower volumes. Total volume grew by
8 per cent to 197 billion, primarily due to incremental volume from newly
acquired businesses and continued regional expansion in Russia, partly offset
by market related declines in Germany, France, Hungary and the Netherlands.
Profit in the Africa and Middle East region grew by GBP 15 million to GBP 268
million, with strong performances from South Africa and Nigeria partly offset
by the continued investment in new markets and difficulties in Zimbabwe.
Volumes rose by 5 per cent to 74 billion, with good growth in Nigeria and
Turkey, partly offset by declines in South Africa and Zimbabwe.
In the nine months to September 2004 BAT`s adjusted diluted earnings per share
grew 7 per cent to 54.97p, benefiting from the impact of the share buy-back
programme and a lower effective tax rate.
Included within its reported operating profit for the 9-month period ended 30
September 2004, BAT reported a restructuring charge of GBP 50 million for
reorganising its subsidiaries` manufacturing operations, together with
restructuring costs amounting to GBP 101 million incurred in the integration of
B&W with RJR. On the combination of B&W with RJR, BAT realised a gain of
GBP 127 million.
In the nine months to 30 September 2004, BAT included within its equity an
amount of GBP 921 million, being the gain on the disposal of subsidiaries and
some GBP 216 million in respect of goodwill reinstated on its balance sheet
linked to the deemed disposal of its US operations. Reflecting the Group`s
accounting policies, Richemont has included its share of the gain on disposal
in its profit and loss account on a reported basis for the six months to 30
September 2004.
Cash flow
September 2004 September 2003
EUR m EUR m
Operating profit 208 81
Depreciation and other non-cash items 65 63
Earnings before interest, tax and
depreciation 273 144
Increase in working capital (168) (48)
Cash generated from operations 105 96
Dividends received from associate 239 237
Returns on investments and servicing of
finance 35 -
Taxation paid (43) (19)
Net acquisitions of fixed assets (40) (31)
Proceeds from disposal of BAT preference
shares 828 -
Other investing activities, net 2 32
Net cash inflow before financing
activities 1 126 315
Dividend paid to unitholders (157) (176)
Decrease in long-term borrowings (63) (100)
Other financing activities (2) (1)
Exchange rate effects 22 22
Increase in cash, cash equivalents and
short-term borrowings 926 60
Cash and cash equivalents at the
beginning of period (371) (744)
Cash and cash equivalents at the end of
period 555 (684)
Long-term borrowings (352) (334)
Net cash / (borrowings) 203 (1 018)
The Group`s cash position moved from net borrowings of EUR 794 million at 31
March 2004 to a net cash position of EUR 203 million at 30 September 2004. The
EUR 997 million improvement largely reflects the contribution from the disposal
of the British American Tobacco preference shares in June 2004, together with
dividends received from BAT during the period. The net cash inflow from
operations totalled EUR 105 million for the period, the increase in operating
profit being partially offset by planned increases in inventories and debtors.
The increase in debtors was broadly in line with wholesale sales growth.
Proceeds from the disposal of the BAT preference shares in June amounted to EUR
828 million. This represented the realisation of the second and final tranche
of the preference shares issued by BAT as part of the consideration for the
merger with Rothmans International in 1999.
Dividends received from British American Tobacco comprise the final dividend in
respect of its financial year ended 31 December 2003 and the interim dividend
for the 2004 financial year. In terms of the accounting treatment applied to
the BAT preference shares, the final dividend, amounting to EUR 33 million
(2003: EUR 14 million), received in April 2004 has been included within
`Returns on investments and servicing of finance`.
The dividend paid in the current period represents the dividend paid by
Richemont SA on its participation certificates for the year ended 31 March
2004. The amount shown in the current period excludes the dividend paid to
holders of South African Depository Receipts on 7 October 2004, amounting to
EUR 62 million.
`Other investing activities` in the prior year included EUR 37 million from the
sale of the Group`s interest in Hanover Direct.
Summarised balance sheet
30 September 2004 31 March 2004
EUR m EUR m
Long-term assets
Fixed assets 722 743
Investment in associated undertaking - BAT 2 916 2 454
Other long-term assets 338 381
3 976 3 578
Net current assets 1 444 2 359
Net operating assets 5 420 5 937
Net cash / (borrowings) 203 (794)
Cash 1 008 186
Bank loans and overdrafts (453) (557)
Short-term portion of long-term loans
and finance leases (278) (359)
Long-term borrowings (74) (64)
Other long-term liabilities (144) (171)
5 479 4 972
Equity
Unitholders` funds 5 475 4 968
Minority interests 4 4
5 479 4 972
The carrying value of the `Investment in associated undertakings - BAT`
represents only the investment in the British American Tobacco ordinary shares
at both 30 September 2004 and 31 March 2004. The Group`s interest in the BAT
preference shares, which were sold in June 2004, is reflected in `Net current
assets` at 31 March 2004.
At 30 September 2004, the Group`s interest in BAT ordinary shares amounted to
18.7 per cent and BAT`s market capitalisation, based on 2 154 million ordinary
shares in issue, amounted to EUR 25 126 million (GBP 17 254 million). The fair
value of the Group`s investment in BAT ordinary shares therefore amounted to
EUR 4 699 million. Details of movements in the Group`s effective interest in
BAT ordinary shares during the period are given in Note 6 to the abridged
financial statements.
The decrease in net current assets in the period was largely due to the
disposal of the Group`s preference shares in BAT. Compared to March 2004, net
inventories increased by 5 per cent to EUR 1 477 million; finished goods
inventories remained fairly constant with the largest increase being in work- in
progress.
Trade debtors increased by over 20 per cent during the six months, broadly in
line with the increase in wholesale sales. Net current assets at March 2004
also included the dividends receivable from BAT. Compared to March 2004, the
reduction in current liabilities is largely due to the unwinding of a derivative
liability to holders of call warrants over the BAT preference shares amounting
to EUR 176 million, partly offset by the dividend payable to South African
Depository Receipt holders as at 30 September 2004.
At 30 September 2004, net cash amounted to EUR 203 million. Cash balances
during the period 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, dollars and Swiss francs.
Borrowings reflect the financing of net operating assets in the countries
concerned.
Consolidated profit and loss account - on a reported basis
September 2004 September 2003
EUR m EUR m
Operating profit 208 81
Net investment income 3 8
Profit before taxation 211 89
Taxation (38) (22)
Profit after taxation 173 67
Minority interests - 1
Net profit of the parent and its subsidiaries 173 68
Share of net profit of associated company 408 51
Share of net profit on an adjusted basis 238 221
Goodwill amortisation (108) (84)
Share of exceptional items reported by associate 278 (86)
Net profit of the Group on a reported basis 581 119
A summary of the effects of goodwill
amortisation and exceptional
items on unitholders` net profit is shown below:
Net profit of the Group on a reported basis 581 119
Elimination of goodwill amortisation
- associated company 108 84
Elimination of exceptional items (278) 86
Net profit on an adjusted basis 411 289
After taking into account goodwill amortisation and exceptional items in
respect of the Group`s interest in British American Tobacco net profit on a
reported basis increased from EUR 119 million to EUR 581 million. Reflecting
the accounting policy adopted by the Group in the financial year ended 31 March
2003, goodwill arising on the acquisition of subsidiary companies is deducted
immediately from unitholders` funds. All goodwill amortisation thus relates to
the Group`s interest in BAT, the Group`s associated company.
The exceptional items reported in respect of BAT for the period primarily
related to the merger of certain of its US domestic business with R.J. Reynolds,
creating Reynolds American Inc. The Group`s share of this gain and other
exceptional items amounted to EUR 278 million. In the prior year, exceptional
items primarily related to restructuring costs incurred by BAT in the UK and
Canada.
Excluding goodwill amortisation and exceptional items from both periods, net
profit of the Group on an adjusted basis increased by 42 per cent to EUR 411
million.
Johann Rupert Richard Lepeu
Executive Chairman Group Finance Director
Compagnie Financiere Richemont SA
Geneva, 18 November 2004
RICHEMONT
ABRIDGED CONSOLIDATED FINANCIAL STATEMENTS
AT 30 SEPTEMBER 2004
UNAUDITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 30 SEPTEMBER 2004
September 2004 September 2003
Notes EUR m EUR m
Sales 1 1 739 1 526
Cost of sales (625) (595)
Gross profit 1 114 931
Net operating expenses 2 (906) (850)
Operating profit 208 81
Net investment income 3 3 8
Profit before taxation 211 89
Taxation (38) (22)
Profit after taxation 173 67
Minority interests - 1
Share of results of associated
undertaking 4 408 51
Net profit 581 119
Earnings per unit 5 EUR EUR
Earnings per unit on a reported
basis - basic 1.063 0.216
Earnings per unit on a reported
basis - fully diluted 1.051 0.216
A summary of net profit, adjusted to exclude the effects of goodwill
amortisation and exceptional items, is set out below:
September 2004 September 2003
Note EUR m EUR m
Net profit 581 119
Goodwill amortisation in respect
of associated undertaking 108 84
Exceptional items reported by
associated undertaking (278) 86
Net profit on an adjusted basis 411 289
Earnings per unit 5
Earnings per unit on an adjusted
basis - basic 0.752 0.525
Earnings per unit on an adjusted
basis - fully diluted 0.743 0.524
CONSOLIDATED BALANCE SHEET
AT 30 SEPTEMBER 2004
September 2004 March 2004 September 2003
Notes EUR m EUR m EUR m
Long-term assets
Property, plant
and equipment 668 684 704
Intangible assets 54 59 60
Deferred tax assets 155 187 137
Investment in
associated undertaking 2 916 2 454 2 498
Other long-term assets 6 183 194 181
7 3 976 3 578 3 580
Net current assets
Inventories 8 1 477 1 402 1 508
Debtors 9 707 1 835 1 596
Cash 1 008 186 164
Current assets 3 192 3 423 3 268
Bank loans and overdrafts (453) (557) (848)
Short-term portion of
long-term loans
and finance leases (278) (359) (68)
Accruals and deferred income (196) (170) (192)
Current liabilities 10 (391) (532) (329)
Current tax liabilities (92) (97) (82)
Provisions (61) (79) (105)
1 721 1 629 1 644
5 697 5 207 5 224
Equity
Share capital 334 334 334
Participation reserve 645 645 645
Unitholders` capital 979 979 979
Treasury units (569) (590) (513)
Retained earnings
and other reserves 5 065 4 579 4 341
Unitholders` funds 5 475 4 968 4 807
Minority interests 4 4 3
5 479 4 972 4 810
Long-term liabilities
Borrowings 74 64 266
Provisions 46 46 55
Post-retirement and other
benefit obligations 92 89 78
Deferred tax liabilities 6 36 15
218 235 414
5 697 5 207 5 224
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD ENDED 30 SEPTEMBER 2004
September 2004 September 2003
Note EUR m EUR m
Cash generated from operations 11 105 96
Interest income and similar items 44 16
Interest paid and similar items (9) (16)
Dividends from associated
undertaking 239 237
Taxation paid (43) (19)
Net cash inflow from operating
activities 336 314
Investing activities
Acquisition of property, plant
and equipment (55) (59)
Proceeds from disposal of
property, plant and equipment 15 28
Acquisition of intangible assets (1) (1)
Proceeds from disposal of
intangible assets - 1
Proceeds from disposal of share
of associated undertaking 828 -
Acquisitions of subsidiary
undertakings
and minority interests, net of
cash acquired - (3)
Acquisitions of other long-term
assets (8) (9)
Proceeds from disposals of other
long-term assets 11 44
Net cash generated in investing
activities 790 1
Net cash inflow before financing
activities 1 126 315
Financing activities
Repayments of long-term
borrowings (63) (100)
Dividend paid on Richemont SA
participation reserve (157) (176)
Other (2) (1)
Net cash used in financing
activities (222) (277)
Net cash inflow after financing
activities 904 38
Effects of exchange rate
movements 22 22
Net increase in cash and cash
equivalents 926 60
Cash and cash equivalents at
beginning of period (371) (744)
Cash and cash equivalents at end
of period 555 (684)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 SEPTEMBER 2004
Share Participation
capital reserve
Notes EUR m EUR m
Balance at 1 April 2003 334 645
Movements in the period
to 30 September 2003
Exchange adjustments - -
Cash flow hedges - fair value gains - -
Purchase of minority interests - -
Net profit - -
Dividend paid on Richemont SA
participation reserve - -
Other - -
Balance at 30 September 2003 334 645
Balance at 1 April 2004 334 645
Movements in the period
to 30 September 2004
Exchange adjustments - -
Cash flow hedges - fair value losses - -
Net movement in treasury units - -
Net profit - -
Dividend paid on Richemont SA
participation reserve - -
Goodwill reinstated on disposal of
subsidiaries by associate 12 - -
Gain on disposal of share of associate 13 - -
Balance at 30 September 2004 334 645
Translation
Treasury and other Retained
units reserves earnings
EUR m EUR m EUR m
Balance at 1 April 2003 (513) (136) 4 662
Movements in the period
to 30 September 2003
Exchange adjustments - (130) (6)
Cash flow hedges - fair value gains - 10 -
Purchase of minority interests - - -
Net profit - - 119
Dividend paid on Richemont SA
participation reserve - - (176)
Other - - (2)
Balance at 30 September 2003 (513) (256) 4 597
Balance at 1 April 2004 (590) (125) 4 704
Movements in the period
to 30 September 2004
Exchange adjustments - 14 -
Cash flow hedges - fair value losses - (30) -
Net movement in treasury units 21 - (10)
Net profit - - 581
Dividend paid on Richemont SA
participation reserve - - (219)
Goodwill reinstated on disposal of
subsidiaries by associate - - 60
Gain on disposal of share of associate - - 90
Balance at 30 September 2004 (569) (141) 5 206
Total
unitholders` Minority
funds interests Total
EUR m EUR m EUR m
Balance at 1 April 2003 4 992 6 4 998
Movements in the period
to 30 September 2003
Exchange adjustments (136) - (136)
Cash flow hedges - fair value gains 10 - 10
Purchase of minority interests - (2) (2)
Net profit 119 - 119
Dividend paid on Richemont SA
participation reserve (176) - (176)
Other (2) (1) (3)
Balance at 30 September 2003 4 807 3 4 810
Balance at 1 April 2004 4 968 4 4 972
Movements in the period
to 30 September 2004
Exchange adjustments 14 - 14
Cash flow hedges - fair value losses (30) - (30)
Net movement in treasury units 11 - 11
Net profit 581 - 581
Dividend paid on Richemont SA
participation reserve (219) - (219)
Goodwill reinstated on disposal of
subsidiaries by associate 60 - 60
Gain on disposal of share of associate 90 - 90
Balance at 30 September 2004 5 475 4 5 479
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT 30 SEPTEMBER 2004
Accounting policies and basis of preparation
The financial statements comprise the unaudited results for the six months
ended 30 September 2004 and 30 September 2003 together with extracts from the
audited financial statements at 31 March 2004.
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 2004. 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 represent
the measurement currency of the Group.
Note 1 - Sales
Analysis of sales by major product line
30 Sept 2004 30 Sept 2003
EUR m EUR m
Jewellery 357 334
Watches 869 733
Writing instruments 130 112
Leather goods 117 98
Textile and other 266 249
1 739 1 526
The above table analyses sales by product l
