Compagnie Financiere Richemont Sa · SIX:CFR
Compagnie Financiere Richemont Sa — Richemont — H1 FY2015 Earnings Presentation
59 slides from Compagnie Financiere Richemont Sa's earnings presentation, November 2014
Slide 1: FY15 Interim Results
FY 15 Interim Results As at September 30, 2014
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: H1-15 Results agenda
H1-15 Results Highlights Review of Operations Financial Review Conclusion Q&A Session
Slide 4: H1-15 key figures
Sales, € m + 4% + 2% H1-15 key figures + 29% + 21% 5 106 5 324 5 430 + 37% 4 214 3 259 Subdued sales growth in a contrasted and volatile environment Sept 10 Sept 11 Sept 12 Sept 13 Sept 14 +4% at constant rates Operating profit, € m +2% to € 5 430m reflecting negative impact 1 075 1 380 1 370
Slide 5: Review of Operations
Review of Operations RicHEMONT
Slide 6: H1-15 sales in Europe
H1-15 sales in Europe Growth slowing to low single digit Reflecting strong euro, cautious wholesale partners, resilient domestic clientele and fewer tourists Noteworthy performance of Van Cleef & Arpels, Lange & Söhne, Roger Dubuis, Montblanc and Net-a-Porter H1-15 Sales = € 1 713m + 19% + 17%
Slide 7: H1-15 sales in the Middle East and Africa
H1-15 sales in the Middle East and Africa Strong double digit growth Spread over most countries Supported by jewellery and premium watches H1-15 Sales = € 415m + 39% + 28% + 21% + 11% Sept 11 Sept 12 Sept 13 Sept 14 % change at constant rates
Slide 8: H1-15 sales in Asia Pacific
H1-15 sales in Asia Pacific Flat sales for the first time since September 2009 Negative impact of HK and Macau Slowdown easing in China Not compensated by strong growth in Taiwan, Korea and Australia Main performers: Van Cleef & Arpels, IWC, Roger Dubuis and Net-a-Porter H1-15 Sales = € 2
Slide 9: H1-15 sales in Americas
H1-15 sales in Americas Double digit sales growth momentum maintained Solid contribution from Cartier, Van Cleef & Arpels, Officine Panerai, Jaeger-LeCoultre and Net-a-Porter H1-15 Sales = € 859m + 35% + 17% + 13% + 4% Sept 11 Sept 12 Sept 13 Sept 14 % change at constant rates
Slide 10: H1-15 sales in Japan
H1-15 sales in Japan 7% sales decline after an exceptional +47% in the quarter ended March 2014 Specialist Watchmakers, Montblanc and Alfred Dunhill experienced growth H1-15 Sales = € 360m + 18% + 9% + 4% Sept 11 Sept 12 Sept 13 Sept 14 - 7% % change at constant rates
Slide 11: H1-15 sales by network
H1-15 sales by network Slowing Retail growth Positive Retail developments, particularly at Van Cleef & Arpels, Officine Panerai, IWC and Net-a-Porter Wholesale performance remains impacted by cautiousness of partners Retail € 2 851m Wholesale € 2 579m + 44% + 29% + 15% + 11% + 5% + 8% + 7% + 2
Slide 12: H1-15 sales by product line
H1-15 sales by product line Watches, slightly negative, impacted by Asia Jewellery continues to be outstanding Writing instruments renewed with growth 6 months €m Sept 14 Sept 13 Constant rates Actual rates Watches 2 650 2 710 - 1% - 2% Jewellery 1 531 1 422 + 10% + 8% Leather Goods 282 318 -
Slide 13: H1-15 Maisons highlights
H1-15 Maisons highlights Slight reduction in contribution margin to 36% at the Jewellery Maisons Contribution margin down to 28% at the Specialist Watchmakers Improvement at Montblanc and Net-a-Porter offsets anticipated higher losses at the Fashion & Accessories Maisons Significant reductio
Slide 14: H1-15 performance – Jewellery Maisons
H1-15 performance – Jewellery Maisons Slight sales increase Continued strong performance of jewellery Resilient operating contribution margin; further improvement at Van Cleef & Arpels 6 months €m Sept 14 Sept 13 Actual rates Sales 2 683 2 667 + 1% Operating contribution 973 984 - 1% Contribut
Slide 15: H1-15 Jewellery Maisons
H1-15 Jewellery Maisons Amulette de Cartier Organic sales growth slightly below prior year Challenging Japan, HK and Macau offset good performances in Europe, ME and Americas Retail up, including China; Wholesale difficult Double digit growth in bijoux (Panther, Love, Amulette) and steel wat
Slide 16: H1-15 Jewellery Maisons
H1-15 Jewellery Maisons Excellent performance across all regions (except Japan) Robe Couleur du Temps and segments supported by Necklace Perlée yellow gold developing into another pillar Alhambra New Cosmos hard stones New Two Butterfly diamonds Between the Finger ring collections New
Slide 17: H1-15 performance – Specialist Watchmakers
H1-15 performance – Specialist Watchmakers Moderate increase in sales 9% decrease in operating contribution mainly attributable to Persisting forex headwinds Difficult environment in HK and Macau Half year operating contribution margin reduced to 28% of sales 6 months €m Sept 14 Sept 13 Ac
Slide 18: H1-15 Specialist Watchmakers
H1-15 Specialist Watchmakers Challenging trading conditions given weight Good organic growth driven by wholesale of Asia in all regions Good growth achieved in Jewellery Broadbased growth from Patrimony, (Possession, Rose) and High Jewellery Historiques and Traditionnelle lines to “high (Ext
Slide 19: H1-15 Specialist Watchmakers
H1-15 Specialist Watchmakers Marked demand across all collections, and in Strong organic sales growth led by particular for high complications & Anniversary All regions excluding Japan models Across channels 1815 Tourbillon Through Excalibur High end complications to The Grand Lange 1
Slide 20: H1-15 Specialist Watchmakers
H1-15 Specialist Watchmakers Strong organic sales growth across most Good growth, sustained by all regions except geographies driven by wholesale in Europe All collections Driven by the Portuguese, Portofino lines and Including the new feminine line "Rendez-Vous“ launch of the new Aquatime
Slide 21: H1-15 Specialist Watchmakers
H1-15 Specialist Watchmakers Robust organic sales growth, esp. in the US, Organic sales modestly above last year Middle East and Japan, led by Good performance in China, France, ME References with in-house movements in the core collection Good increase in the Maison pillars: Clifton Nota
Slide 22: H1-15 performance – Other
H1-15 performance – Other Losses reached 21 million euros Improving results at Montblanc, Net-a-Porter and unbranded watch component manufacturing Significant increase in losses at the other Fashion & Accessories Maisons, as anticipated 6 months €m Sept 14 Sept 13 Actual rates Sales 1 122 1 07
Slide 23: H1-15 Other
H1-15 Other +6% organic sales growth balanced across channels leading Meisterstück Heritage to €371m sales Pulsograph Primarily supported by writing instruments and leather All regions grew at constant rates with the Americas and the Middle East being the most dynamic Sales also positively d
Slide 24: H1-15 Other
H1-15 Other Difficult trading in Asia Pacific; Japan showed Decline in sales derived from French positive momentum in Yen market exposure and withdrawal from a number of wholesale points of sale Rationalisation of wholesale underway, weighing on sales Successful September launch of the Charl
Slide 25: H1-15 Other
H1-15 Other Flat organic sales growth Strong broad based growth rate Strong Retail except in Japan Asia Pacific site now taking off Successful winter 14 RTW collection offset poor momentum in leather Retail in Leather turned positive since successful June launch of the Drew bag August
Slide 26: Financial Review
Financial Review
Slide 27: H1-15 operating profit
H1-15 operating profit 4% decline in operating profit 160 basis point reduction in operating margin Slower than planned expense growth 6 months €m Sept 14 Sept 13 Period change Sales 5 430 5 324 + 2% Gross profit 3 505 3 402 + 3% Net operating expenses - 2 194 - 2 032 + 8% Selling and distribu
Slide 28: H1-15 gross profit
H1-15 gross profit 3% increase in gross profit Positive pricing power and channel mix Negative forex Positive impact of lower precious materials costs € million as a % of sales + 24% + 3% + 160bps + 60bps + 3% - 90bps 3 310 3 402 3 505 64.8 % 64.5 % 2 665 63.9 % 63.2 % Sept 11 Sept 12 Sept 1
Slide 29: H1-15 operating expenses
H1-15 operating expenses Increase of 8% reflects primarily higher rentals and depreciation Communication expenses reflect timing of projects and planned increases at Net-a-Porter + 8% 2 194 2 032 + 7% 1 149 1 231 + 12% + 5% 419 470 459 483 5 10 Sept 13 Sept 14 Sept 13 Sept 14 Sept 13 Sept 14 Sep
Slide 30: H1-15 net finance income and costs
H1-15 net finance income and costs Marked increase in net finance costs Mark to market losses on hedging program compared with gains in prior period An adverse movement in interest rate swap due to lower US interest rates 6 months €m Sept 14 Sept 13 Period change Financial (expense)/income, ne
Slide 31: H1-15 profit
H1-15 profit Net profit impacted by Lower EBIT Higher finance costs 6 months €m Sept 14 Sept 13 Period change Operating profit 1 311 1 370 - 4% Net finance income/(costs) - 215 69 Profit before taxation 1 096 1 439 - 24% Taxation - 186 - 252 - 26% Share of post taxation results of equity-accou
Slide 32: H1-15 cash flow from operations
H1-15 cash flow from operations Sept 14 1 008 Cashflow from operations, solid at €1 008m Sept 13 1'292 Planned increase, primarily in jewellery inventories, accounts for working capital movement Sept 12 577 Receivable portfolio remains healthy 6 months €m Sept 14 Sept 13 Period change Operatin
Slide 33: H1-15 capital expenditure
H1-15 capital expenditure Capital expenditure in line with last year Annual guidance of up to €900m cash outflow maintained Gross € 257m € 260m Piaget – LA Rodeo drive, USA as a % of sales 4.8% 4.8% Sept 13 Sept 14 Sept 13 Sept 14 Cartier – Temporary 59th Street, New York City, USA
Slide 34: H1-15 capital expenditure
H1-15 capital expenditure Significant investments in manufacturing 28% of Group capex € 260m € 257m Retail 32% 33% Retail Manufacturing 41% 28% Manufacturing Cartier – Jewellery facility, Switzerland Other 27% 39% Other Sept 13 Sept 14 A. Lange & Söhne – New Glasshütte Manufacture
Slide 35: H1-15 free cash flow
H1-15 free cash flow Reduction reflects lower cash flow from operations and higher tax payments 6 months €m Sept 14 Sept 13 Period change Cash flow from operations 1 008 1 292 - 284 Net change in tangible assets - 201 - 208 7 Net change in intangible assets - 43 - 47 4 Acquisition of investment pr
Slide 36: Balance sheet strength
Balance sheet strength € 17.5 bn € 17.5 bn Fixed Assets 18% Other Non-Current Assets 6% 70% Total Equity Inventories 28% Other Current Assets 10% ST Investments 14% 4% Non-Current Liabilities 24% 26% Current Liabilities Cash Assets Liabilities
Slide 37: Conclusion
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Slide 38: October 2015 sales
October 2015 sales -1% at constant currencies, +4% reported Negative impact of unrest in HK and Macau Not fully compensated by strong US and Middle East Unfavourable basis of comparison (+12% cc; +6% reported in Oct. 2013)
Slide 39: Post H1-15 closing events
Post H1-15 closing events Divestment of the St Regis retail space on Fifth Avenue NY, USA Selling price of US$ 700m for an acquisition price of US$375m in 2012 Gain of € 226m to be recorded in H2 operating income
Slide 40: Flexibility in business model allows for adjustments to protect cash-flow
Flexibility in business model allows for adjustments to protect cash-flow Selective savings initiatives Slower production since September Continued roll out of ERP project
Slide 41: Conclusion
Conclusion Volatility, primarily due to geopolitical risks, likely to continue to prevail Long term strategy reaffirmed Fostering organic growth through investments in all our Maisons, including the Fashion & Accessories Maisons Jewellery: a still largely untapped market A resilient produc
Slide 42: Q&A Session
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Slide 43: Appendix
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Slide 44: Strategic objectives
Strategic objectives Achieve long term organic growth building goodwill, rather than acquiring goodwill By further developing competitive advantages through Attraction and retention of entrepreneurial & creative management as well as skilled craftsmen Control over production & product develo
Slide 45: Financial highlights
Financial highlights Sales, € m Gross margin, € m Operating profit, € m + 14% + 5% 3 505 1 370 + 29% 6 519 3 402 2 048 2 426 1 311 10 649 5 651 6 751 2 419 10 150 64.5% 25.7% 8 868 + 4% + 2% 63.7% 64.2% 63.9% 23.1% 23.9% 24.1% 63.4% 22.7% 5 324 5 430 FY12 FY13 FY14 Sept 13 Sept 14 FY12 FY13 FY14 Sep
Slide 46: Hedging policy
Hedging policy 70% of our forecasted net foreign currency cash flow exposure arising in USD block, HKD, JPY, RMB is hedged versus CHF and Euro In the case of USD, the net exposure takes into account purchases of precious metals and precious stones Hedges are entered into each month in respect
Slide 47: Foreign currency hedging contracts
Foreign currency hedging contracts 6 months average 12 months average versus the CHF Hedge rate to Sept 14 Actual rate to Sept 14 Hedge rate to March 15 YEN 109 114 114 US $ 0.92 0.90 0.91 HK $ 8.51 8.60 8.64 RMB 6.85 6.88 6.92 Average rates against the CHF 6 months to 30 Sept 14 6 months to 30 Sept
Slide 48: H1-15 sales by region
H1-15 sales by region 6 months €m Sept 14 Sept 13 Constant rates Actual rates Europe 1 713 1 653 + 3% + 4% Middle East/Africa 415 349 + 21% + 19% Asia Pacific 2 083 2 124 - 0% - 2% Americas 859 784 + 13% + 10% Japan 360 414 - 7% - 13% Total sales 5 430 5 324 + 4% + 2%
Slide 49: H1-15 sales by business area
H1-15 sales by business area 6 months €m Sept 14 Sept 13 Constant rates Actual rates Jewellery Maisons 2 683 2 667 + 3% + 1% Specialist Watchmakers 1 625 1 587 + 4% + 2% Other 1 122 1 070 + 5% + 5% Total sales 5 430 5 324 + 4% + 2%
Slide 50: H1-15 reported operating result by business area
H1-15 reported operating result by business area 6 months €m Sept 14 Sept 13 Period change Jewellery Maisons 973 984 - 1% Specialist Watchmakers 461 504 - 9% Other - 21 - 11 n/a Operating contribution 1 413 1 477 - 4% Corporate costs - 102 - 107 - 5% Central support services - 97 - 102 - 5% Other op
Slide 51: H1-15 Group results
H1-15 Group results 6 months €m Sept 14 Sept 13 Period change Sales 5 430 5 324 + 2% Cost of sales - 1 925 - 1 922 + 0% Gross profit 3 505 3 402 + 3% Net operating expenses - 2 194 - 2 032 + 8% Operating profit 1 311 1 370 - 4% Net finance income/(costs) - 215 69 Share of post taxation results of eq
Slide 52: Summary balance sheet
Summary balance sheet €m Sept 14 Sept 13 Non-current assets 4 150 3 921 Current assets 13 321 11 688 Non-current liabilities 749 - 819 Current liabilities - 4 458 - 3 800 Equity attributable to owners of the parent company - 12 268 - 10 994 Non-controlling interests 4 4 Equity - 12 264 - 10 990 incl
Slide 53: Inventory
Inventory €m Sept 14 Sept 13 Period change Finished goods 3 018 2 667 351 + 13% Raw materials and work in progress 1 791 1 677 114 + 7% Total 4 808 4 344 464 + 11% Rotation Sept 14 Sept 13 Number of months of COGS 18.2 16.6
Slide 54: Retail network
Retail network September 2014 Internal External vs PY Internal vs PY External March 2014 Montblanc 489 259 230 + 25 + 4 460 Cartier 287 198 89 + 3 - 6 290 Alfred Dunhill 223 147 76 - - 11 234 Chloé 167 94 73 + 2 + 3 162 Lancel 108 72 36 - 1 - 3 112 Van Cleef & Arpels 105 72 33 + 2 - 1 104 Piaget 98
Slide 55: H1-15 Main Product Launches
H1-15 Main Product Launches Cartier Van Cleef & Arpels Jewellery Jewellery Cartier Royal HJ collection Peau d’Âne HJ collection Panthère de Cartier Cosmos hard stones Amulette de Cartier Two Butterfly diamonds Paris Nouvelle Vague Bridal “Your Poetic Setting” Watches Watches Calibr
Slide 56: H1-15 Main Product Launches
H1-15 Main Product Launches Piaget Vacheron Constantin Watches Watches Limelight Diamonds Métiers d’Art Mécaniques Ajourées Altiplano dame Malte 82230 Mini tradition Traditionnelle 82172 Blooming Rose Tonneau mécanique Patrimony small size Jewellery Extreme Piaget HJ Rose new r
Slide 57: H1-15 Main Product Launches
H1-15 Main Product Launches Jaeger-LeCoultre IWC Watches Watches Master Grande Tradition Tourbillon grande Aquatimer Auto/Chrono complication Ingenieur Dual Time Rendez-vous Ivy Minute Repeater Pilot Chrono Petit Prince Portofino Midsize Officine Panerai Baume & Mercier Watches Watches
Slide 58: H1-15 Main Product Launches
H1-15 Main Product Launches Montblanc Alfred Dunhill Writing Instruments Leather Meisterstück 90 years Traveller Navy & Burgundy LLG StarWalker Extreme Bourdon bi colours LLG Watches Writing Instruments Meisterstück Heritage Perpetual Calendar Avorities Bohême automatic Leather Meist
Slide 59: Richemont
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