| Thu 17 Nov 2005, 8:04 | | Richemont Securities AG - Interim Results |
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Richemont Securities AG - Interim Results
Richemont Securities AG
(Incorporated in Switzerland)
JSE Code : RCH
ISIN: CH0013157380
("Richemont")
Interim results
Richemont, the Swiss luxury goods group, announces its unaudited
results for the six-month period ended 30 September 2005.
These results are presented for the first time in compliance
with International Financial Reporting Standards ("IFRS")
rather than Swiss generally accepted accounting principles. The
comparative figures presented here have been restated to
reflect the IFRS reporting framework.
in EUR millions September 2005 September 2004
Parent and subsidiaries
Sales 1 990 1 718 +16%
Operating profit 334 199 +68%
Net profit 270 116 +133%
Share of post-tax profit of
associate -
British American Tobacco
Before non-recurring
(expenses) / income 278 240 +16%
Non-recurring (expenses) /
income (19) 371 -
Net profit - share of
associate 259 611 -58%
Net profit of the Group 529 727 -27%
Earnings per unit - diluted
basis EUR 0.942 EUR 1.315 -28%
* Group sales increased by 16 per cent to EUR 1 990 million,
reflecting good growth across all markets.
* Cartier, Van Cleef & Arpels, Montblanc and the Group"s specialist
watchmakers all reported double-digit sales growth in the period.
* The growth in sales, linked to a controlled increase in operating
expenses, resulted in operating profit from Richemont"s luxury goods
businesses increasing by 68 per cent to EUR 334 million. Excluding the
gain of EUR 11 million realised on the sale of Hackett, operating profit
increased by 62 per cent to EUR 323 million.
* Net profit from the parent and subsidiaries increased by 133 per cent to
EUR 270 million.
* The Group"s share of the post-tax profit of its associated company,
British American Tobacco, excluding the impact of non-recurring items from
both periods, increased by 16 per cent to EUR 278 million. In the 2004
comparative period the Group"s share of non-recurring items reported by
BAT amounted to EUR 371 million. This stemmed largely from the gain
arising on the merger of BAT"s US business with that of R.J. Reynolds.
Including such items in both periods, the Group"s share of BAT"s earnings
fell by 58 per cent to EUR 259 million.
* Excluding the gain realised on the sale of Hackett, net profit of the
Group, including the contribution from British American Tobacco before
non- recurring items, increased by 51 per cent to EUR 537 million.
However, taking into account the EUR 11 million gain and the impact of
non-recurring items reported by BAT in both periods, net profit of the
Group declined by 27 per cent to EUR 529 million.
* Earnings per unit on a diluted basis decreased by 28 per cent. Excluding
the impact of non-recurring items in both periods, earnings per unit on a
diluted basis increased by 48 per cent from EUR 0.644 to EUR 0.956.
* Cash generated by operations was EUR 175 million for the six-month period.
Net cash at 30 September 2005, after payment of the ordinary and special
dividends of EUR 553 million, amounted to EUR 384 million.
This document contains forward-looking statements as that term is defined in
the United States Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are not guarantees of future performance.
Actual results may differ materially from the forward-looking statements as a
result of a number of risks and uncertainties, many of which are outside the
Group"s control. Richemont does not undertake to update, nor does it have any
obligation to provide updates of or to revise, any forward-looking statements.
Executive Chairman"s commentary
The results for the six-month period to 30 September show strong growth in
sales and a significant increase in operating profit from Richemont"s luxury
goods operations. The Maisons have performed well.
Sales in the period increased by 16 per cent and operating profit grew by 68
per cent. Eliminating the one-off gain on the disposal of Hackett, which is
included in the operating profit figure, growth was 62 per cent compared to the
same period of last year.
Whilst the Americas have shown the strongest growth in the period at 21 per
cent, the Group has seen 18 per cent sales growth in the Asia-Pacific region
and 14 per cent in Europe. In Japan, where the signs are that the deflationary
cycle may finally be coming to an end, sales increased by 11 per cent.
Cartier has enjoyed sustained growth in all of its markets with particularly
good growth in terms of high jewellery. In Japan, which remains a very
important market for Cartier, sales grew by 13 per cent in the period.
Van Cleef & Arpels is growing and is establishing itself as a leader in terms
of design and exclusivity at the very top end of the market.
It is pleasing to see the Group"s specialist watchmakers all report strong
sales growth. Vacheron Constantin, in its 250th anniversary year, has performed
particularly well, although all of the watch businesses have enjoyed very good
growth, as evidenced by the 23 per cent increase in sales in the period.
Montblanc also experienced very good growth in its watch and leather goods
ranges during the six months. Whilst firmly rooted in its writing instrument
heritage, Montblanc has very successfully extended its reach into other product
lines - a tribute to the strength of the brand.
Alfred Dunhill"s sales increased by 4 per cent overall. Excellent growth in the
Asia Pacific region and in the smaller North American market was offset by
disappointing sales figures in Europe and Japan. To some extent, these were due
to supply difficulties in particular product areas. However, in leather
products, the new product lines introduced over the last year have generated
good demand.
Lancel has reported growth in sales of 11 per cent for the half year. Given
that its business is focused in the French domestic market, this is an
encouraging performance and supports our view that, with the right product mix,
Lancel can flourish.
In terms of our other businesses, I would like to mention specifically Chloe.
This business has outperformed its peers, more than doubling its sales in the
six-month period under review. With a unique design positioning, strong
management and Richemont"s backing, Chloe is developing its wholesale business
and rolling out its international retail expansion programme.
British American Tobacco
Richemont"s investment in BAT continues to perform well. Excluding the large
non-recurring items reported by BAT in the prior year, our share of BAT"s
profits increased by 16 per cent and, in cash terms, Richemont received
dividend income of EUR 247 million. BAT is a truly global business which is
well managed with the clear objective of maximising profitability and
shareholder value.
Transition to International Financial Reporting Standards ("IFRS")
Richemont has fully implemented IFRS in the preparation of these interim
financial statements for the period ended 30 September 2005, having previously
reported under Swiss generally accepted accounting principles. It is worth
noting that, despite the complexities of IFRS, which will result in more
volatility from year to year in the Group"s results, we do not anticipate any
significant changes to the Group"s business plan as a result of this accounting
change.
The principal change stemming from the move to IFRS is that Richemont
no longer amortises goodwill relating to the investment in British American
Tobacco. Although we have always fully hedged stock option awards to employees,
the Group must also apply the new provisions of the international standards
which require the expensing of stock options. In this respect, operating profit
for the six months under review includes a notional charge of EUR 17 million
(2004:EUR 16 million) in respect of options granted to employees.
Full details of the impact of IFRS on the 2005 financial statements, which we
have restated to reflect the new rules, can be found on the Richemont website
at www.richemont.com/investorinfo/interim_2005.php
Richemont is also required to provide extensive supplementary information in
this year"s interim report, as it is the first to be presented in accordance
with IFRS. Rather than include the financial statements in their entirety here,
these can be downloaded from the Group"s website and will be mailed to
unitholders upon request.
Outlook
The performance of the first six months points to a strong year for Richemont.
Although sales in October showed a slowdown in the rate of growth, they were 10
per cent above the prior year at historic rates. Asia-Pacific, the Americas
and Japan all reported double digit growth during the month. Sales in Europe,
however, were flat compared to October 2004, Cartier having recorded certain
exceptional high-jewellery sales in Paris during that month.
I am confident that - in the absence of any external events outside our control
- Richemont"s luxury businesses will report good growth in terms of sales and
operating profit for the year as a whole.
Johann Rupert
Executive Chairman
Geneva, 17 November 2005
Business Review
Overview
in EUR millions September 2005 September 2004
Sales 1 990 1 718 +16%
Cost of sales (715) (670)
Gross profit 1 275 1 048 +22%
Net operating expenses (941) (849) +11%
Selling and distribution
expenses (470) (421) +12%
Communication expenses (235) (201) +17%
Administration expenses (234) (236) -1%
Other (expense) / income (2) 9 -
Operating profit 334 199 +68%
The results for the six months to September 2004 have been restated to comply
with International Financial Reporting Standards ("IFRS"). A reconciliation
from Swiss generally accepted accounting principles ("Swiss GAAP ARR") to IFRS
is included in the notes to the consolidated interim financial statements,
which are available on the Group"s website:(www.richemont.com).
Sales increased by 16 per cent to EUR 1 990 million, with strong growth
throughout the period and in all regions.
The gross margin percentage increased by three percentage points to 64.1 per
cent, reflecting changes in the product and distribution mix, as well as
higher utilisation rates in manufacturing. Linked to the introduction of IFRS,
more
exact measurement criteria have been applied in arriving at the level of
provisions required in respect of inventories. During the period under review,
the gross margin percentage increased by 0.7 per cent as a consequence of the
release of inventory provisions. The increase in sales and the improved margin
percentage led to a 22 per cent increase in gross profit to EUR 1 275 million.
Net operating expenses increased by 11 per cent, primarily due to increases in
selling and distribution expenses and communication costs. Communication costs
increased by 17 per cent but, as a percentage of sales, were in line with the
prior year at some 11.8 per cent. Compared to the prior period, administration
expenses were in line, representing some 11.8 per cent of sales. Net operating
expenses included stock option charges amounting to EUR 17 million (September
2004: EUR 16 million), reflecting the introduction of IFRS 2 Share-based
Payment.
An accounting gain of EUR 11 million, relating to the disposal of Hackett in
June 2005, is included in other (expense) / income for the period under review.
Operating profit increased by 68 per cent to EUR 334 million. Excluding the
gain on the disposal of Hackett, operating profit increased by 62 per cent to
EUR 323 million and the operating margin increased by 4.6 percentage points to
16.2 per cent during the period.
Analysis of sales and operating results by business area
Sales and the operating results of the Group"s main areas of activity were as
follows:
in EUR millions September 2005 September 2004
Sales
Jewellery Maisons 1 038 914 +14%
Specialist watchmakers 522 424 +23%
Writing instrument manufacturers 208 184 +13%
Leather and accessories Maisons 124 116 +7%
Other businesses 98 80 +23%
Total sales 1 990 1 718 +16%
Operating results
Jewellery Maisons 283 213 +33%
Specialist watchmakers 118 72 +64%
Writing instrument manufacturers 28 17 +65%
Leather and accessories Maisons (26) (25) -4%
Other businesses (2) (1) -
401 276 +45%
Corporate costs (67) (77) -13%
Head office costs (74) (69) +7%
Other operating income /
(expense) 7 (8) -
Operating profit 334 199 +68%
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 result for that segment.
Following the introduction of IFRS 2 Share-based Payment, charges for stock
options have been allocated, in both periods, to operating costs within the
relevant business areas and head office expenses.
Jewellery Maisons
Sales by the Jewellery Maisons increased by 14 per cent, with double-digit
growth in all regions. Sales in the Japanese market, where Cartier has a well-
established distribution network, showed good growth. During the period,
Cartier successfully launched the Panther jewellery collection, as well as the
Pasha 42 and Tankissime watch lines. Van Cleef & Arpels" continuing growth
reflected product launches such as the Boutonniere bijoux line.
For the segment as a whole, the sales increase has generated an operating
profit of EUR 283 million and an operating margin of 27.3 percent, 4.0
percentage points above the comparative period last year.
Specialist Watchmakers
The Group"s specialist watchmakers reported a 23 per cent increase in sales and
an increase in the operating margin from 17.0 per cent in the comparative
period to 22.6 per cent. The rate of growth reflects developments across all
regions, the highest rate of growth being seen in the Americas region.
The high rate of growth attests to the success of new products launched at the
Geneva Salon International de Haute Horlogerie in April 2005. Piaget"s
Possession watch uses motifs from the Maison"s jewellery line of the same name,
whilst Jaeger LeCoultre"s AMVOX and Compressor Extreme have further
demonstrated the technical expertise for which the Maison is renowned. IWC"s
new designs in the Ingenieur collection have been a runaway success, already
accounting for 20 per cent of the Maison"s sales and Panerai has enjoyed
continued success in the high-end sport segment with both established
lines
and new models. Double-digit sales growth at Baume & Mercier reflects the
success of new models, including the Diamant and Classima Executive.
A. Lange & Sohne has impressed watch connoisseurs with the Lange 1 TimeZone
model, and
Vacheron Constantin has marked its 250th anniversary with unique items and
limited editions such as the Tour de L"Ile model. These exclusive pieces
are currently touring the world to showcase the Maison"s achievements in
Haute Horlogerie.
Writing Instrument Manufacturers
Richemont"s writing instrument manufacturers, Montblanc and Montegrappa,
reported total sales growth of 13 per cent. This increase in sales partly
reflects Montblanc"s growth as a retailer, with one third of the Maison"s
sales now being made directly to customers through the Group"s own network.
Despite the higher costs associated with retail activities, operating profit
increased by 65 per cent.
Leather and Accessories Maisons
Strong growth in the Asia-Pacific region offset flat sales in Europe and Japan
increasing Alfred Dunhill"s sales by 4 per cent. Sales of leather goods, the
Maison"s main product line, increased by 14 per cent, but overall losses were
broadly in line with the prior period at EUR 20 million.
Lancel"s sales increased by 11 per cent, despite the low level of economic
growth in France, the Maison"s principal market. This double-digit growth
reflects the regeneration of the brand"s reputation in leather goods, both in
France and in its international markets. Lower operating losses of EUR 6
million were broadly in line with expectations.
Lancel will open its new flagship boutique on the Champs Elysees in Paris
before Christmas. This represents a further step on the way to Lancel re-
establishing its prestige position in the French market.
Other businesses
Excluding Hackett, which was sold in June 2005, sales of the Group"s other
businesses increased by 50 per cent.
Chloe"s success continues. Despite a strong performance last year, sales
doubled. Great demand for new product lines, for example the Paddington bag,
new store openings and strong wholesale sales contributed to this success.
Operating profit
Operating profit before corporate costs totalled EUR 401 million, an increase
of 45 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 16 per
cent to 20 per cent. Corporate 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 businesses.
The improvement in trading has resulted in an improvement in the operating
profit margin from 11.6 per cent to 16.8 per cent, or 16.2 per cent excluding
the gain on the disposal of Hackett.
Sales by region
Movement at:
Constant Actual
exchange exchange
in EUR millions September 2005 September 2004 rates rates
Europe 827 724 +15% +14%
Japan 331 297 +13% +11%
Asia-Pacific 422 357 +18% +18%
Americas 410 340 +23% +21%
1 990 1 718 +17% +16%
Europe
Sales in European markets, which accounted for 42 per cent of sales, increased
by 14 per cent. The strong growth rate reflects good performances in most major
markets and very high growth in the Middle East and Russia. The UK market, in
contrast, showed a downturn in sales following the terrorist bombings, which
took place in early July.
Japan
In Japan, sales growth was 11 per cent for the period, with jewellery and watch
brands benefiting from a return of consumer confidence as the economy shows
signs of recovery. Cartier sales, in particular, increased by 13 per cent in
this market during the period.
Asia-Pacific
Sales in the Asia-Pacific region were well ahead of the comparative period,
with sales increasing in most major markets by more than 20 per cent, despite
demanding comparative figures. Sales in China, representing 12 per cent of
regional sales, increased by 24 per cent at historic rates reflecting the
Group"s continuing investment in this market. Richemont now has 250 points of
sale in the country and Cartier, Montblanc and Alfred Dunhill expect to operate
their own distribution subsidiaries in China by the end of the financial year.
Americas
Sales growth in the Americas region reflected the continuing strength of
consumer confidence in the United States during the period, with most brands
reporting double-digit growth.
Sales by distribution channel
in EUR millions September 2005 September 2004
Retail 757 671 +13%
Wholesale 1 233 1 047 +18%
1 990 1 718 +16%
Retail
Retail sales showed good growth over the period, increasing by 13 per cent to
EUR 757 million. Excluding Hackett, the total retail network increased by 71 in
the period to 984 boutiques; of the increase, 14 stores were opened by the
Group and 57 by partners. At the end of September, the Group"s Maisons owned
563 boutiques, with a further 421 points of sale being operated by franchise
partners.
Wholesale
Driven by demand for the Group"s watch products in particular, wholesale sales
were particularly strong, showing an overall increase of 18 per cent.
Summary income statement and results of associate
in EUR millions September 2005 September 2004
Operating profit 334 199
Net investment expense - (42)
334 157
Share of post-tax results of associated
undertaking 259 611
Before non-recurring (expenses) / income 278 240
Share of non-recurring (expenses) / income (19) 371
Profit before taxation 593 768
Taxation (64) (41)
Net profit 529 727
Net interest income of EUR 6 million in the period under review was offset by
net foreign exchange losses and fair value adjustments. In the prior period,
net investment expense of EUR 42 million primarily reflected net foreign
exchange losses on intra-group financing. Recognition of such differences on
intercompany balances is required under IFRS and steps have been taken to
reduce the potential for such balances to materially impact profitability in
the future.
Excluding the Group"s share of the results of its investment in British
American Tobacco, the Group"s effective taxation rate was 19.2 per cent,
reflecting the anticipated full year rate. This rate is some seven percentage
points lower than the comparative period, primarily due to the inclusion in net
investment expense of the non-tax effective foreign exchange movements on
intra-group financing during the comparative period.
Associated company - British American Tobacco ("BAT")
For the six-month period ended 30 September 2005, the Group"s share of the
results of BAT decreased to EUR 259 million. The reduction largely reflects the
significant and non-recurring income reported by BAT in the prior period in
respect of the merger of its North American operations with those of R.J.
Reynolds to form Reynolds American, in which BAT now holds 42 per cent of the
equity. Excluding this and other non-recurring income from the prior period
and non-recurring expense from the current period, the Group"s share of the
results of BAT would have increased by 16 per cent to EUR 278 million.
The results for the period reflect an 18.4 per cent interest in BAT"s results
for the three months to June 2005 and an 18.5 per cent interest for the three
months ending 30 September 2005. This compares to the Group"s 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 30 September
2004.
The increased contribution from BAT for the period, before non-recurring items,
was despite a 2 per cent depreciation of sterling against the euro and the
Group"s reduced percentage interest compared to the prior period.
In cash flow terms, during the six months under review, Richemont received
ordinary share dividends totalling EUR 247 million.
The following commentary is condensed from BAT"s latest quarterly financial
report for the nine months ended 30 September 2005.
Operating profit for the nine months was 43 per cent lower at GBP 1 091 million,
mainly due to the impact in 2004 of the significant GBP 1 392 million gain on
the merger of BAT"s North American operations with those of R.J. Reynolds in
July 2004 to form Reynolds American. However, profit from operations would have
been 9 per cent higher, or 6 per cent higher at constant rates of exchange, if
exceptional items and the changes resulting from the merger of BAT"s US
businesses with R. J. Reynolds and the sale of Etinera, together with the
resulting beneficial changes in terms of trade in Italy, were excluded. This
"like for like" information provides a better understanding of the
subsidiaries" trading results.
On a reported basis, BAT"s volumes from subsidiaries were affected by the
transactions noted above, resulting in a 2 per cent decrease to 505 billion
sticks.
Excluding the impact of these transactions, there was good organic volume
growth from subsidiaries, with many markets contributing to the volume growth
of 2 per cent on a like for like basis.
In Europe, profit, excluding restructuring costs and the gain on disposal of
brands, increased by GBP 42 million to GBP 616 million, with strong growth from
Russia, Germany, France and Romania. Regional volumes were up by around 1 per
cent to 184 billion sticks as growth in Russia, France and Poland was offset by
declines in Italy and Germany.
In Asia-Pacific, regional profit rose by GBP 41 million to GBP 418 million
reflecting good performances in Australasia and Pakistan, a benefit in the
first quarter from the timing of an excise payment in South Korea and the good
results from a number of the other markets which more than covered reductions
seen in Malaysia and Vietnam. Regional volume at 103 billion sticks was 4 per
cent higher, as strong increases in Pakistan and Bangladesh were partially
offset by volume declines in South Korea, Vietnam and Malaysia.
In Latin-America, profit at GBP 378 million increased by GBP 53 million, as good
performances were delivered in Brazil, Chile, Venezuela and Peru. Volume, at
110 billion sticks, increased slightly as growth in many markets was offset by
declines in Mexico and Argentina.
Profit in the Africa and Middle East region grew by GBP 49 million to GBP 308
million with good performances mainly from South Africa, Turkey and Iran.
Volumes grew by 8 per cent to 76 billion sticks as a result of the strong
growth in Turkey and the markets in the Middle East.
On a comparable basis, the America-Pacific regional profit was GBP 43 million
lower at GBP 327 million and volumes were 4 per cent lower. Profit was down in
both Canada and Japan, while volumes were also lower in Canada. As the
comparative period included BAT"s former US tobacco businesses (now merged with
R. J. Reynolds and included in the figure for income from associates reported
by BAT), reported regional volumes were down by 42 per cent to 33 billion and
reported profit was GBP 192 million lower.
BAT"s share of the post tax results of associates increased by GBP 180 million
to
GBP 277 million, reflecting the inclusion of GBP 165 million following the
transaction which resulted in the formation of Reynolds American last year. On
a proforma US GAAP basis, as if the combination with Brown & Williamson had
been completed as of 1 January 2004, Reynolds American reported that operating
profit for the nine months to September 2005 increased by 24 per cent and net
income rose 4 per cent.
In the nine months to September 2005 BAT"s adjusted diluted earnings per share
grew 23 per cent to 67.91p benefiting from the improved underlying operating
performance, reduced net finance costs, a lower effective tax rate and minority
interests, as well as the impact of the Reynolds American transaction and the
share buy-back programme. While these factors also benefited the basic
earnings per share, they were offset by the inclusion of the gain on the
Reynolds American transaction in the 2004 comparatives leading to a reduction
in basic earnings per share from 121.23 p to 65.73 p for the nine month period.
Further information in respect of British American Tobacco can be obtained from
that company"s website: www.bat.com.
Analysis of net profit
in EUR millions September 2005 September 2004
Parent and subsidiaries
Net profit before non-recurring
(expenses) / income 259 116
Gain from sale of subsidiary undertaking 11 -
Net profit from parent and subsidiaries 270 116
Share of post-tax profit of associate -
British American Tobacco
Net profit before non-recurring
(expenses) / income 278 240
Non-recurring (expenses) / income (19) 371
Net profit - share of associate 259 611
Net profit of the Group 529 727
Analysed as follows:
Parent, subsidiaries and share of
associate before non-recurring items 537 356
Non-recurring (expenses) / income (8) 371
Net profit of the Group 529 727
Earnings per unit excluding non-recurring
(expenses) / income
Basic EUR 0.973 EUR 0.651
Diluted basis EUR 0.956 EUR 0.644
During the period the Group realised a gain on the disposal of its Hackett
subsidiary of EUR 11 million. There was no such item in the comparative period.
The non-recurring items included in the Group"s share of the results of its
associate, British American Tobacco, amounted to a net charge of EUR 19 million
in the period under review. This primarily reflects restructuring charges, net
of gains on the disposal of subsidiaries, non-current investments and brands.
In the comparative period, the non-recurring net gain of EUR 371 million
primarily reflected gains on the disposal of subsidiaries, non-current
investments and brands, reduced by the impact of restructuring charges. The
most significant of these disposal gains arose in the quarter ended 30
September 2004 and related to the agreement to combine BAT"s US business, Brown
& Williamson, with R.J. Reynolds, as detailed above.
Excluding non-recurring items from both periods, net profit in the six months
to 30 September 2005 would have been EUR 537 million compared to EUR 356
million in the prior period, representing an increase of 51 per cent.
Excluding non-recurring items, fully diluted earnings per unit would have
increased by 48 per cent from EUR 0.644 to EUR 0.956.
Cash flow
in EUR millions September 2005 September 2004
Operating profit 334 199
Depreciation and other non-cash items 82 74
Earnings before interest, tax and
depreciation 416 273
Increase in working capital (241) (168)
Cash generated from operations 175 105
Dividends received from associate 247 272
Returns on investments and servicing of
finance 9 2
Taxation paid (39) (43)
Net acquisitions of fixed assets (95) (41)
Proceeds from disposal of BAT preference
shares - 828
Other investing activities, net (4) 3
Net cash inflow before financing
activities 293 1 126
Dividends paid to unitholders (553) (157)
Normal dividend (276) (157)
Special dividend (277) -
Decrease in long-term borrowings (67) (135)
Proceeds from sale of treasury units 52 -
Other financing activities (1) -
Exchange rate effects (4) 22
(Decrease) / increase in cash, cash
equivalents and short-term borrowings (280) 856
Cash and cash equivalents at the
beginning of period 1 183 6
Cash and cash equivalents at the end of
period 903 862
Borrowings (519) (659)
Net cash 384 203
The Group"s net cash position decreased from EUR 617 million at 31 March 2005
to EUR 384 million at 30 September 2005. The decrease largely reflected the
payment of both the normal and special dividends in September 2005, in
particular the payment of a special dividend amounting to EUR 277 million.
The net cash inflow from operations totalled EUR 175 million for the period,
the increase in operating profit being partially offset by increases in
inventories and debtors. The increase in debtors was broadly in line with
wholesale sales growth.
Dividends received from British American Tobacco comprise the final dividend in
respect of its financial year ended 31 December 2004, received in April and the
interim dividend for the 2005 financial year, received in September. Total
dividends received in the prior year included EUR 33 million in respect of the
final dividend on BAT preference shares, which were disposed of in June 2004.
Within investing activities in the prior period, proceeds from the disposal of
the BAT preference shares 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.
The dividend paid in the current period represents the dividends paid by
Richemont SA and by Compagnie Financiere Richemont SA for the year ended 31
March 2005. The total dividend per unit, amounting to EUR 1.00, included a
special dividend of EUR 0.50 per unit.
Treasury units were sold in connection with the exercise of stock options by
executives, resulting in a net cash inflow of EUR 52 million.
Summarised balance sheet
in EUR millions 30 September 2005 31 March 2005
Non-current assets
Fixed assets 777 733
Investment in associated undertaking -
BAT 3 240 3 218
Other non-current assets 433 416
4 450 4 367
Net current assets 1 643 1 462
Net operating assets 6 093 5 829
Net cash 384 617
Bank and cash 1 140 1 409
Bank overdrafts (237) (226)
Borrowings (519) (566)
Other non-current liabilities (181) (165)
6 296 6 281
Equity
Unitholders" equity 6 290 6 275
Minority interests 6 6
6 296 6 281
At 30 September 2005, the Group"s interest in BAT ordinary shares amounted to
18.5 per cent and BAT"s market capitalisation, based on 2 104 million ordinary
shares in issue, amounted to EUR 36 758 million (GBP 25 065 million). The fair
value of the Group"s investment in BAT therefore amounted to EUR 6 813 million.
Details of movements in the Group"s effective interest in BAT ordinary shares
during the period are given in the notes to the consolidated interim financial
statements and in the commentary earlier in this document.
Net current assets increased by EUR 181 million compared to March 2005. Net
inventories increased by 8 per cent to EUR 1 644 million; the increase being
largely offset by increases in current liabilities, while trade debtors
increased by some 40 per cent during the six months, reflecting both the
seasonality of wholesale sales and the growth seen during the period under
review.
At 30 September 2005, net cash amounted to EUR 384 million. Cash balances were
primarily denominated in euros, whereas borrowings were spread across the
principal currencies of the countries in which the Group has significant
operations, namely, euros, yen, dollars and Swiss francs. Borrowings reflect
the financing of net operating assets in the countries concerned.
Norbert Platt Richard Lepeu
Chief Executive Officer Group Finance Director
Compagnie Financiere Richemont SA
Geneva, 17 November 2005
Extracts from the unaudited consolidated interim financial statements
at 30 September 2005
Extract from consolidated interim financial statements (unaudited)
Consolidated balance sheets
30 September 2005 31 March 2005
ASSETS Note EUR m EUR m
Non-current assets
Property, plant and equipment 726 681
Intangible assets 51 52
Investment in associated
undertaking 1 3 240 3 218
Deferred income tax assets 231 227
Financial assets held at fair
value through profit or loss 36 36
Other non-current assets 166 153
4 450 4 367
Current assets
Inventories 1 644 1 522
Trade and other receivables 702 520
Derivative financial
instruments 2 15
Prepayments and accrued income 113 116
Bank and cash 1 140 1 409
3 601 3 582
Total assets 8 051 7 949
EQUITY AND LIABILITIES
Equity
Share capital 334 334
Participation reserve 645 645
Treasury units (471) (560)
Fair value and other reserves 47 59
Cumulative translation
adjustment reserve 44 24
Retained earnings 5 691 5 773
Total Unitholders" equity 6 290 6 275
Minority interest 6 6
Total equity 6 296 6 281
LIABILITIES
Non-current liabilities
Borrowings 206 155
Deferred income tax liabilities 34 34
Retirement benefit obligations 101 97
Provisions 46 34
387 320
Current liabilities
Trade and other payables 360 352
Current income tax liabilities 146 120
Borrowings 7 4
Derivative financial
instruments 28 3
Provisions 73 63
Accruals and deferred income 211 173
Short-term loans 306 407
Bank overdrafts 237 226
1 368 1 348
Total liabilities 1 755 1 668
Total equity and liabilities 8 051 7 949
Extract from consolidated interim financial statements (unaudited)
Consolidated income statements
Six months to
30 September 2005
Notes EUR m
Sales 1 990
Cost of sales (715)
Gross profit 1 275
Selling and distribution expenses (470)
Communication expenses (235)
Administrative expenses (234)
Other operating (expenses)/income (2)
Operating profit 334
After:
Gain from sale of subsidiary undertaking 2 11
Gain on partial indirect disposal of share
of associated undertaking -
Net investment income / (expense) 3 -
Share of post-tax profit of associated
undertaking 1 259
After:
Share of other (expenses) / income
of associated undertaking 1 (19)
Profit before taxation 593
Taxation 5 (64)
Net profit 529
Attributable to:
Unitholders 529
Minority interest -
529
Earnings per unit for profit attributable to
Unitholders
during the period (expressed in EUR per unit)
- basic 4 EUR 0.959
- diluted 4 EUR 0.942
Six months to Year to
30 September 2004 31 March 2005
EUR m EUR m
Sales 1 718 3 671
Cost of sales (670) (1 415)
Gross profit 1 048 2 256
Selling and distribution expenses (421) (893)
Communication expenses (201) (414)
Administrative expenses (236) (468)
Other operating (expenses)/income 9 80
Operating profit 199 561
After:
Gain from sale of subsidiary undertaking - -
Gain on partial indirect disposal of
share
of associated undertaking - 76
Net investment income / (expense) (42) (48)
Share of post-tax profit of associated
undertaking 611 798
After:
Share of other (expenses) / income
of associated undertaking 371 305
Profit before taxation 768 1 311
Taxation (41) (97)
Net profit 727 1 214
Attributable to:
Unitholders 727 1 212
Minority interest - 2
727 1 214
Earnings per unit for profit
attributable to Unitholders
during the period
(expressed in EUR per unit)
- basic EUR 1.330 EUR 1.517
- diluted EUR 1.315 EUR 1.498
Extract from consolidated interim financial statements (unaudited)
Consolidated statement of changes in equity
Equity attributable to Unitholders
Share Participation Treasury
capital reserve units
EUR m EUR m EUR m
Balance at 31 March 2004 334 645 (590)
Currency translation adjustments - - -
Transfer of hedge reserve on
settlement of net investment hedge - - -
Cash flow hedges - net losses - - -
Net share of BAT equity movements - - -
Net income / (expense) recognised
directly in equity - - -
Net profit - - -
Total recognised income / (expense) - - -
Net sale of treasury units - - 21
Employee unit option scheme - - -
Dividends paid - - -
Balance at 30 September 2004 334 645 (569)
Currency translation adjustments - - -
Cash flow hedges:
- net gains - - -
- transfer to income statement - - -
Net share of BAT equity movements - - -
Net income / (expense) recognised
directly in equity - - -
Net profit - - -
Total recognised income - - -
Net sale of treasury units - - 9
Employee unit option scheme - - -
Balance at 31 March 2005 334 645 (560)
Adoption of IAS 32 and IAS 39 - - -
Balance at 1 April 2005 334 645 (560)
Currency translation adjustments - - -
Cash flow hedges:
- net losses - - -
- transfer to income statement - - -
Net share of BAT equity movements - - -
Net income / (expense) recognised
directly in equity - - -
Net profit - - -
Total recognised income / (expense)
Net sale of treasury units - - 89
Employee unit option scheme - - -
Dividends paid - - -
Balance at 30 September 2005 334 645 (471)
Equity attributable to Unitholders
Fair
value Cumulative
and translation
other adjustment Retained
reserves reserve earnings
EUR m EUR m EUR m
Balance at 31 March 2004 44 - 4 605
Currency translation adjustments - (34) -
Transfer of hedge reserve on
settlement of net investment hedge (28) 28 -
Cash flow hedges - net losses (2) - -
Net share of BAT equity movements - - 189
Net income / (expense) recognised
directly in equity (30) (6) 189
Net profit - - 727
Total recognised income / (expense) (30) (6) 916
Net sale of treasury units - - (10)
Employee unit option scheme 16 - -
Dividends paid - - (219)
Balance at 30 September 2004 30 (6) 5 292
Currency translation adjustments - 25 -
Cash flow hedges:
- net gains 26 - -
- transfer to income statement (12) - -
Net share of BAT equity movements - - (35)
Net income / (expense) recognised
directly in equity 14 25 (35)
Net profit - - 485
Total recognised income 14 25 450
Net sale of treasury units - 5 31
Employee unit option scheme 15 - -
Balance at 31 March 2005 59 24 5 773
Adoption of IAS 32 and IAS 39 5 - (5)
Balance at 1 April 2005 64 24 5 768
Currency translation adjustments - 20 -
Cash flow hedges:
