Compagnie Financiere Richemont Sa · SIX:CFR
Compagnie Financiere Richemont Sa — Richemont — H1 FY2017 Earnings Presentation
52 slides from Compagnie Financiere Richemont Sa's earnings presentation, November 2016
Slide 1: FY17 Interim Results
FY17 INTERIM RESULTS AS AT 30 SEPTEMBER 2016
Slide 2: Forward-looking statements
This document contains forward-looking statements as that term is defined in the United States Private Securities Litigation Reform Act of 1995. Words such as 'may', 'should', 'estimate', 'project', 'plan', 'believe', 'expect', 'anticipate', 'intend', 'potential', 'goal', 'strategy', 'target', 'will
Slide 3: H1-17 Results
H1-17 RESULTS › Highlights › Review of Operations › Financial Review › Conclusion › Q&A Session
Slide 4: H1-17 Key Figures
H1-17 KEY FIGURES › Sales down 13% at actual; 12% at constant exchange rates Sales In € million Difficult global environment Sept 16 5 086 Sept 15 5 821 Challenging comparatives Operating profit -8% at constant exchange rates In € million excluding the impact of buy-backs Sept 16 15.7% 798 Sep
Slide 5: Review of Operations
Review of Operations RICHEMONT \ Pioneering since 1906. For the pioneer in you. Inspired by the beginning of modern sea travelling, the Montblanc 4810 Chronograph Automatic embodies the precision of fine Swiss watch- making and artisanal refinement with the iconic exploding star. Discover the full s
Slide 6: Sales in Europe
H1-17 SALES IN EUROPE › Demanding comparatives › Weak trading across the region Significantly lower tourist spend, particularly in France Except in the UK, growing double digit › Watches down, flat to positive contribution from other product lines 1 943 1 587 -17% 9% 9% 16% Europe 31% Asia Pacif
Slide 7: Sales in the Middle East and Africa
H1-17 SALES IN THE MIDDLE EAST AND AFRICA › Unsupportive currencies impacting resident and tourist sales › Most product lines affected 489 432 -10% 9% 9% Europe Asia Pacific 16% Americas 31% Japan Middle East/Africa Sept Sept 15 16 35% in €m % change at constant rates
Slide 8: Sales in Asia Pacific
H1-17 SALES IN ASIA PACIFIC › Rate of decline softening to high single digit Hong Kong and Macau still weak, impacted by buy-backs Continued growth in mainland China and Korea › Positive contribution from jewellery and accessories 1 972 9% 1 769 -8% 9% Europe 16% Hong Kong China 31% Rest of Asia
Slide 9: Sales in Americas
H1-17 SALES IN AMERICAS › Mid single digit decline Persisting weakness in watches Continued outperformance of accessories; resilience of jewellery 883 821 -5% 9% 9% Europe 16% Asia Pacific Americas 31% Japan Middle East/Africa Sept Sept 15 16 35% in €m % change at constant rates
Slide 10: Sales in Japan
H1-17 SALES IN JAPAN › Exceptionally challenging comparatives (+44% in H1-16) › Strong yen weighed on tourist spending › All product categories impacted 534 477 -22% 9% 9% Europe Asia Pacific 16% Americas 31% Japan Middle East/Africa Sept Sept 15 16 35% in €m % change at constant rates
Slide 11: Sales by Network
H1-17 SALES BY NETWORK › Retail sales decline in tourist markets softened by Sept 15 Sept 16 Jewellery and accessories 54% 58% 46% Asia Pacific and Americas 42% › Wholesale impacted by buy-backs and lower Retail Wholesale tourist flows Retail Wholesale 3 149 2 672 2 971 -5% 2 115 -20% Sept Sept
Slide 12: Sales by Product Line
H1-17 SALES BY PRODUCT LINE › Watches, down 24% › Jewellery showed resilience › Leather goods and writing intruments, 4% 4% 5% 41% Watches good growth 7% Jewellery Leather Goods › Clothing affected by store closures Clothing Writing Instruments Other 39% 6 months €m Sept 16 Sept 15 Constant rates Ac
Slide 13: Maisons Highlights
H1-17 MAISONS HIGHLIGHTS › Jewellery Maisons profitability declined to 27% › The Specialist Watchmakers suffered the largest decline in operating contribution margin - now 13% of sales › The Other business area generated a loss; positive contribution excluding one-time charges
Slide 14: Performance – Jewellery Maisons
H1-17 PERFORMANCE – JEWELLERY MAISONS › Sales decline primarily attributable to watches › Contribution margin of 31.7% excluding one-time items Period 6 months €m Sept 16 Sept 15 change Sales 2 755 3 177 -13% Operating contribution 756 1 101 -31% Contribution margin 27.4% 34.7% -730 bps
Slide 15: Jewellery Maisons
H1-17 JEWELLERY MAISONS › Downturn in retail limited to single digit thanks to Resilient jewellery enriched with new lines and references across price points New retail opportunities › Wholesale sales affected by watch buy-backs Adaptation of offer to demand Panthère Envoûtante New Drive wat
Slide 16: Jewellery Maisons
H1-17 JEWELLERY MAISONS › Muted growth achieved thanks to jewellery New models enriching existing collections New collections across price points › Impactful jewellery events Emeraude en Majesté international launch Bouton d’or launch Bouton d'or L’Arche de Noé exhibition › Selective retai
Slide 17: Performance – Specialist Watchmakers
H1-17 PERFORMANCE – SPECIALIST WATCHMAKERS › Sales decline reflects difficult environment Primarily in wholesale, Hong Kong and Switzerland Softened by a positive performance in mainland China › Significant operating deleverage Period 6 months €m Sept 16 Sept 15 change Sales 1 445 1 749 -17% Ope
Slide 18: Specialist Watchmakers
H1-17 SPECIALIST WATCHMAKERS › Commendable performance of › Negative momentum worldwide jewellery except in mainland China and the Middle East › Successful introduction of the Polo S › Good start of the revisited Overseas › Difficult trading in watches partially and new Métiers d’Art Elégance affect
Slide 19: Specialist Watchmakers
H1-17 SPECIALIST WATCHMAKERS › Solid trend in mainland China and › Overall sales decline cushioned by Japan could not compensate positive momentum in Asia and weakness elsewhere retail › Lange 1 relaunch now completed › Launches centered around the Excalibur and Velvet lines Lange 1 Excalibur Carbon
Slide 20: Specialist Watchmakers
H1-17 SPECIALIST WATCHMAKERS › Strong momentum in mainland › Successful relaunch of the Pilot line China and the UK not overcoming helped moderate the reduction in a marked decline in most tourist overall sales destinations › Mainland China and Korea were particularly noteworthy Reverso One Duetto M
Slide 21: Specialist Watchmakers
H1-17 SPECIALIST WATCHMAKERS › Retail helped mitigate overall rate › Difficult trading in most markets of decline in sales › Classima and Promesse confirmed › Middle East enjoyed good as the Maison’s pillars respectively momentum across both channels for men and women Lo Scienziato – Luminor 1950 To
Slide 22: Performance – Other
H1-17 PERFORMANCE – OTHER › Sales decline limited to -1% › Continued outperformance of Montblanc and Chloé › One-time items of €67m affected profitability Period 6 months €m Sept 16 Sept 15 change Sales 886 895 -1% Operating contribution -40 -11 264% Contribution margin -4.5% -1.2% -330 bps
Slide 23: Other
H1-17 OTHER › Mid-single digit growth in organic sales driven by Writing instruments Leather › E-commerce strongly supporting retail sales Montblanc Meisterstuck › New digital device: Augmented Paper › Retail network enhanced with Continued rollout of retail concept Six new internal stores M
Slide 24: Other
H1-17 OTHER › Double-digit growth in sales driven › Lower sales partly resulting from by Leather and most regions Weight of France › E-commerce platform operated by YNAP now operational Five major stores closed for renovation › Good start of the latest launches completing the offer with more acc
Slide 25: Financial Review
Financial Review RICHEMONT -
Slide 26: Operating Profit
H1-17 OPERATING PROFIT › 43% decrease in operating profit Lower gross profit Comparable operating profit excluding one-time charges down 25% Period 6 months €m Sept 16 Sept 15 change Sales 5 086 5 821 -13% Gross profit 3 230 3 786 -15% Net operating expenses -2 432 -2 396 2% Selling and distribu
Slide 27: Gross Profit
H1-17 GROSS PROFIT › 15% decrease in gross profit Positive: higher share of retail, exchange rates environment Negative: buy-backs and optimisation of wholesale network 3 786 65.0% -15% 3 230 -150bps 63.5% Sept Sept Sept Sept 15 16 15 16 in €m as a % of sales
Slide 28: Operating Expenses
H1-17 OPERATING EXPENSES › Increase of 2% reflects Supportive currencies 2% Contained expenses €2 432m One-time charges of €31m €2 396m +0.7ppts +1.1ppts +1.3ppts -1.7ppts Sept FY16 Boutiques A&P Other Fx Sept FY17 +2% 2 396 2 432 +1% 1 440 1 452 +4% +0% 468 485 474 476 14 19 Sept 15 Sept 16 S
Slide 29: Net Finance Income and Costs
H1-17 NET FINANCE INCOME AND COSTS › Reversal in net finance income No movements in monetary items Increase in hedging losses Period 6 months €m Sept 16 Sept 15 change Financial income/(expense), net 4 -4 +8 Net foreign exchange gains on monetary items – 130 -130 Net losses on hedging activities
Slide 30: Profit from Continuing Operations
H1-17 PROFIT FROM CONTINUING OPERATIONS › Profit for the period impacted by Operating profit decline Reversal in finance costs Period 6 months €m Sept 16 Sept 15 change Operating profit 798 1 390 -43% Net finance (costs)/ income -109 76 Share of post-tax results of equity-accounted -10 -5 inv es
Slide 31: Cash Flow from Operations
H1-17 CASH FLOW FROM OPERATIONS* › Working capital contained › Cash flow lower due to lower operating profit Period 6 months €m Sept 16 Sept 15 change Operating profit* 798 1 311 -513 Depreciation and amortisation 270 271 -1 Other items 15 31 -16 Movement in working capital -417 -558 141 Cash flow f
Slide 32: Capital Expenditure
H1-17 CAPITAL EXPENDITURE* › Lower capex spend Retail investments include flagships 282 251 -11% 4.9% 4.8% Sept Sept Sept Sept 15 16 15 16 Gross in €m as a % of sales * Prior year includes discontinued operations Renovated Cartier Mansion Fifth Avenue mansion, New York
Slide 33: Capital Expenditure
H1-17 CAPITAL EXPENDITURE* › Investments focused on €282m €251m Store renovation and relocation Worldwide distribution centre Retail 45% 51% Retail Chloé – Avenue Montaigne, Paris Manufacturing 17% 20% Manufacturing Cartier – Pavilion, Other 38% 29% Other Kuala Lumpur Sept 15 Sept 16 * Prior yea
Slide 34: Free Cash Flow
H1-17 FREE CASH FLOW* › Decrease in free cash flow due to lower cash flow from operations Period 6 months €m Sept 16 Sept 15 change Cash flow from operations 666 1 055 -389 Net change in tangible assets -210 -242 32 Net change in intangible assets -18 -35 17 Net change in other non-current assets -1
Slide 35: Balance Sheet Strength
BALANCE SHEET STRENGTH €20.1bn €20.1bn Fixed assets 16% Other non-current assets 12% 73% Total equity Inventory 27% Other current assets 7% Investments in money market and externally 17% managed funds 5% Non-current liabilities 22% Current liabilities Cash 21% Assets Liabilities
Slide 36: Conclusion
Conclusion RICHEMONT
Slide 37: Conclusion: Addressing Near Term Challenges
CONCLUSION: ADDRESSING NEAR TERM CHALLENGES › Areas of focus Product attractiveness and quality Adapt to the new norm › Sound financial position and confidence in the long term prospects for high quality products
Slide 38: Q&A Session
Q&A Session
Slide 39: Appendix
Appendix RICHEMONT
Slide 40: Strategic Objectives
STRATEGIC OBJECTIVES › Achieve long term organic growth By generating ›Steady cash flows ›Value over the long term ›Sustainable dividend growth By further developing competitive advantages through ›An entrepreneurial & creative management as well as skilled craftsmen ›Control over production & p
Slide 41: Financial Highlights
FINANCIAL HIGHLIGHTS Sales Gross profit Operating profit € million € million € million Sept 16 -13% 5 086 Sept 16 64% 3 230 Sept 16 +16% 798 Sept 15 +15% 5 821 Sept 15 65% 3 786 Sept 15 +24% 1 390 FY16 +6% 11 076 FY16 64% 7 118 FY16 +19% 2 061 FY15 +4% 10 410 FY15 66% 6 876 FY15 +26% 2 670 FY14 -1%
Slide 42: Hedging
HEDGING › 70% of our forecasted net foreign currency cash flow exposure arising primarily in USD block, HKD, JPY, CNY is hedged versus CHF › In the case of USD, the net exposure takes into account purchases of precious metals and precious stones › Different types of currency derivatives can be used
Slide 43: Sales by Region and Business Area
H1-17 SALES BY REGION AND BUSINESS AREA Constant Actual Share of 6 months €m Sept 16 Sept 15 rates* rates total Europe 1 587 1 943 -17% -18% 31% Middle East/Africa 432 489 -10% -12% 9% Asia Pacific 1 769 1 972 -8% -10% 35% Americas 821 883 -5% -7% 16% Japan 477 534 -22% -11% 9% Total sales 5 086 5 8
Slide 44: Operating Result by Business Area
H1-17 OPERATING RESULT BY BUSINESS AREA Period 6 months €m Sept 16 Sept 15 change Jewellery Maisons 756 1 101 -31% Specialist Watchmakers 187 402 -53% Other -40 -11 NR Operating contribution 903 1 492 -39% Corporate costs -105 -102 +3% Central support serv ices -93 -95 -2% Other operating expenses -
Slide 45: Group Results
H1-17 GROUP RESULTS Period 6 months €m Sept 16 Sept 15 change Sales 5 086 5 821 -13% Cost of sales -1 856 -2 035 -9% Gross profit 3 230 3 786 -15% Net operating expenses -2 432 -2 396 +2% Operating profit 798 1 390 -43% Net finance (costs)/income -109 76 Share of post-tax results of equity-accounted
Slide 46: Summary Balance Sheet and Inventory
SUMMARY BALANCE SHEET AND INVENTORY €m Sept 16 Sept 15 Non-current assets 5 639 4 471 Current assets 14 480 14 476 Non-current liabilities -919 -861 Current liabilities -4 555 -4 012 Equity attributable to owners of the parent company -14 645 -14 094 Non-controlling interests 0 20 Equity -14 645 -14
Slide 47: Retail Network
RETAIL NETWORK Period change Net Sept 16 Internal External March 16 Internal External change Montblanc 578 278 300 573 6 -1 5 Cartier 283 202 81 279 5 -1 4 Chloé 168 99 69 170 2 -4 -2 Alfred Dunhill 159 119 40 192 -25 -8 -33 Van Cleef & Arpels 118 79 39 116 1 1 2 Piaget 98 71 27 97 3 -2 1 Jaeger-LeC
Slide 48: Main Product Launches
H1-17 MAIN PRODUCT LAUNCHES › Jewellery › Jewellery Magicien – High Jewellery Emeraude en Majesté – High Jewellery Amulette de Cartier, new references L’Arche de Noé – High Jewellery Cactus de Cartier Bouton d’or › Watches Two Butterfly Nacre Clé de Cartier, new references › Watches
Slide 49: Main Product Launches
H1-17 MAIN PRODUCT LAUNCHES › Jewellery › Overseas, relaunch Sunny Side of Life – High Jewellery › Patrimony, new references Possession, new references › Métiers d’Art Elégance Sartoriale Rose, new references › Watches Piaget Polo S › Saxonia Moon Phase › Velvet, new references › Grand Lange
Slide 50: Main Product Launches
H1-17 MAIN PRODUCT LAUNCHES › Reverso – High Jewellery › Pilot collection relaunch › Master Memovox › Lo Scienziato – Luminor 1950 Tourbillon GMT › Classima, new references Titanio - 47mm › Capeland Shelby Cobra › Radiomir 1940 3 days GMT - 45mm, new › Petite Promesse references
Slide 51: Main Product Launches
H1-17 MAIN PRODUCT LAUNCHES › Writing Instruments › Leather Heritage Rouge & Noir Cadogan line relaunch Meisterstück Ultra-Black › Menswear › Watches New packable outwear Montblanc 4810 (Chrono), new references Boheme (Day & Night) › Leather Urban Spirit Light › Leather › Leather Jul
Slide 52: Richemont
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