Compagnie Financiere Richemont Sa · SIX:CFR
Compagnie Financiere Richemont Sa — FY2014 Earnings Presentation
72 slides from Compagnie Financiere Richemont Sa's earnings presentation, May 2014
Slide 1: FY14 Annual Results
FY14 Annual Results As at March 31, 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: FY14 Results
FY14 Results Highlights Review of Operations Financial Review Strategic Directions & Conclusion Q&A Session
Slide 4: FY14 highlights
Sales, € m FY14 highlights + 29% + 14% 10 150 + 5% 10649 + 33% 8 868 6 892 Given Contrasted environment FY11 FY12 FY13 FY14 Substantial forex headwinds Underperformance of Montblanc, Alfred Dunhill and Chloé Operating profit, % 23.1% 23.9% 22.7% Satisfactory results 19.7% Sales growth of
Slide 5: Review of Operations
Review of Operations
Slide 6: FY14 sales in Europe
FY14 sales in Europe Growth moderating to high single digit Driven by a pick up in domestic clientele and tourism, albeit at a lower rate Supported by Van Cleef & Arpels and stores openings at the Specialist Watchmakers FY14 Sales = € 3 178m + 21% + 17% + 13% + 9% FY11 FY12 FY13 FY14 % change
Slide 7: FY14 sales in the Middle East and Africa
FY14 sales in the Middle East and Africa Strong double digit growth Fuelled by robust jewellery Maisons and Specialist Watchmakers FY14 Sales = € 741m + 35% + 22% + 18% + 10% FY11 FY12 FY13 FY14 % change at constant rates
Slide 8: FY14 sales in Asia Pacific
FY14 sales in Asia Pacific Moderate growth in line with last year Retail greatly outperforms wholesale Persisting regional contrasts Double digit growth in Macau, Korea and Australia Stable retail in China Main performers: Van Cleef & Arpels, Jaeger-LeCoultre and IWC FY14 Sales = € 4 235
Slide 9: FY14 sales in Americas
FY14 sales in Americas Acceleration in sales growth Solid performance of Jewellery Maisons, Specialist Watchmakers and Net-a-Porter Strong domestic clientele and growing impact of tourism, from a low base Sustained momentum throughout period FY14 Sales = € 1 603m + 30% + 30% + 11% + 14% FY11
Slide 10: FY14 sales in Japan
FY14 sales in Japan Significant double digit growth includes +47% increase in Q4 Benefitting from attractive pricing and for March advanced purchases ahead of VAT increase Excellent performance of most Maisons FY14 Sales = € 892m + 23% + 9% + 6% + 1% FY11 FY12 FY13 FY14 % change at constant ra
Slide 11: FY14 sales by network
FY14 sales by network Robust retail performance led by the Maisons’ existing boutiques, 42 new stores and Net-a-Porter group Increased contribution of retail, now accounting for 55% of Group sales Wholesale performance remains impacted by cautiousness Retail € 5 849m Wholesale € 4 800m + 35% +
Slide 12: FY14 sales by product line
FY14 sales by product line Jewellery enjoyed strongest growth Watches maintained high single digit growth 12 months €m FY14 FY13 Constant rates Actual rates Watches 5 125 4 968 + 8% + 3% Jewellery 3 025 2 726 + 18% + 11% Clothing 968 833 + 21% + 16% Leather Goods 644 742 - 8% - 13% Writing Instr
Slide 13: FY14 Maisons highlights
FY14 Maisons highlights Stable profitability at the Jewellery Maisons & Specialist Watchmakers Montblanc Maison affected by lower sales and one-off items reflecting reorganisation costs Results of Other Maisons affected by soft sales momentum Improved results at the Net-a-Porter Group
Slide 14: FY14 performance – Jewellery Maisons
FY14 performance – Jewellery Maisons Ongoing overperformance of jewellery compensates for moderate decline of Cartier watches (up on a constant currency basis) High operating contribution margin of 35% thanks to high profitability at Cartier and further improvement at Van Cleef & Arpels 12 month
Slide 15: FY14 performance – Specialist Watchmakers
FY14 performance – Specialist Watchmakers Good increase in sales across most Maisons 6% increase in operating contribution, notwithstanding substantial forex headwinds Most Specialist Watchmakers improved their results, including Baume & Mercier Operating contribution margin remained healthy
Slide 16: FY14 performance – Montblanc Maison
FY14 performance – Difficult year with sales down 5% Operating contribution impacted by reorganisation provisions of € 25m To be reported under the "Other " business area starting FY15 12 months €m FY14 FY13 Actual rates Sales 730 766 - 5% Operating contribution 43 120 - 64% Contribution margi
Slide 17: FY14 performance – Other
FY14 performance – Other Underperformance of Alfred Dunhill, Lancel and Chloé weighed heavily Masking improving results at Net-a-Porter Group and positive contribution from Peter Millar (full year effect) Stable negative contribution of manufacturing 12 months €m FY14 FY13 Actual rates Sales 1
Slide 18: Financial Review
Financial Review RICHEMONT
Slide 19: FY14 operating profit
FY14 operating profit Stable operating profit Operating expense growth as planned 120 bps reduction in operating margin includes provisions of € 25m 12 months €m FY14 FY13 Annual change Sales 10 649 10 150 + 5% Gross profit 6 751 6 519 + 4% Net operating expenses - 4 332 - 4 093 + 6% Selling a
Slide 20: FY14 gross profit
FY14 gross profit Further increase in gross profit, at a rate marginally below sales growth Positive pricing power continues Positive impact of manufacturing variances Offsetting negative forex and provisions € million as a % of sales + 15% + 4% + 29% 6 751 - + 50bps - 80bps 6 519 5 651 4 39
Slide 21: FY14 operating expenses
FY14 operating expenses Moderate increase reflects investments in distribution and organisation +4.0ppts -4.1ppts +1.7ppts 4’332 +4.2ppts 4’093 Opex FY13 New A&P Other FX FY14 boutiques
Slide 22: FY14 net finance income and costs
FY14 net finance income and costs Positive net finance income thanks to hedging gains of € 214m 12 months €m FY14 FY13 Annual change Financial (expense)/income, net - 30 - 19 - 11 Non-cash gains/(losses) on Euro denominated liquid bond funds 2 19 - 17 Net gains/(losses) on monetary items and hedgi
Slide 23: FY14 profit
FY14 profit Net profit up 3% benefitting from significant gains on hedging activities 12 months €m FY14 FY13 Annual change Operating profit 2 419 2 426 - Net finance costs 64 - 47 Profit before taxation 2 483 2 379 + 4% Taxation - 411 - 370 + 11% Share of post-tax results of equity-accounted inves
Slide 24: FY14 cash flow from operations
FY14 cash flow from operations FY14 2 875 Strong increase in cash flow from operations Limited increase in working capital reflects FY13 1 944 Discipline over inventories Cash settlement of hedging programme FY12 1 798 12 months €m FY14 FY13 Annual change Operating profit 2 419 2 426 - 7 Dep
Slide 25: FY14 capital expenditure
FY14 capital expenditure 10% increase in capital expenditure primarily attributable to IT and platforms Cartier – Relocation - Moscow, Berlin House, Petrovka Street Van Cleef & Arpels – Renovation - New York 5th Avenue
Slide 26: FY14 capital expenditure
FY14 capital expenditure Balanced capex allocation across the Group € 675m Increased weight of Other (distribution platforms, € 612m e-commerce, security, ERP deployment) 38% Retail Retail 42% 30% Manufacturing Manufacturing 33% Other 25% 32% Other Vacheron Constantin Manufacture Plan-les-Ouates
Slide 27: FY14 free cash flow
FY14 free cash flow Sharp increase reflects strong cash flow from operations and a moderate increase in capital expenditure 12 months €m FY14 FY13 Annual change Cash flow from operations 2 875 1 944 931 Net change in tangible assets - 542 - 524 - 18 Net change in intangible assets - 98 - 70 - 28 A
Slide 28: Balance sheet strength
Balance sheet strength € 15.9bn € 15.9bn Fixed Assets 21% Other Non-Current Assets 5% Inventories 28% 75% Total Equity Other Current Assets 7% ST Investments 18% 5% Non-Current Liabilities Cash 21% 20% Current Liabilities Assets Liabilities
Slide 29: Dividends
Dividends FY14 dividend of CHF 1.40/share Increase of 40% Reflects Strong increase in cash flow and Objective to grow dividends steadily over the long term
Slide 30: April 2014 sales
April 2014 sales +1% reported growth, +6% constant growth To be compared to +13% reported (+12%cc) in April 2013 Driven by jewellery, Americas and ME/Africa Growth in all regions in reported terms except for Japan counterbalancing the 32% reported growth seen in Q4 ahead of the VAT increase
Slide 31: Strategic directions & conclusion
Strategic directions & conclusion
Slide 32: Achieve long term sustainable growth
Achieve long term sustainable growth Build goodwill and value through Investments in our Maisons, including full control over production, supply chain and distribution Consistent deployment of our business model BUILD GOODWILL INSTEAD OF ACQUIRING GOODWILL
Slide 33: Investments to achieve sustainable LT growth
Investments to achieve sustainable LT growth Develop capabilities & diversification, capitalising on core competencies Watches for Van Cleef & Arpels Jewellery for Piaget Watches and leather for Montblanc Build sustainable product desirability through creativity and innovation Talented d
Slide 34: Investments to achieve sustainable LT growth
Investments to achieve sustainable LT growth Invest in markets with promising growth potential Middle East and Africa India Korea, Thailand Chinese & Latin American clientele Invest in distribution networks Controlled extension of retail network focusing on renovation & relocation Wo
Slide 35: Consistent deployment of business model
Consistent deployment of business model Richemont business model combines Autonomy of Maisons in terms of creation, production, marketing and distribution Leverage, consistency of services and control through Richemont shared services and corporate centre (support functions, platforms and ERP)
Slide 36: Conclusion
Conclusion Achieve long term sustainable organic growth Increase Maisons equity, creating goodwill Maintain long standing commitment to doing business responsibly generating Steady cash flows Sustainable dividend growth Value over the long term for our clients, shareholders and employees
Slide 37: Q&A Session
Q&A Session
Slide 38: Appendix
i. Z ) 2 fn 0 aa
Slide 39: Financial highlights
Financial highlights Sales, € m Gross margin, € m Operating profit, € m + 14% + 5% + 29% 6 519 10 150 10 649 4 394 5 651 2 426 + 33% 8 868 6 751 2 048 2 419 63.7% 63.7% 64.2% 1 355 23.9% 6 892 63.4% 23.1% 22.7% 19.7% FY11 FY12 FY13 FY14 FY11 FY12 FY13 FY14 FY11 FY12 FY13 FY14 + 40% Capex, € m Divide
Slide 40: 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 41: Hedging policy
Hedging policy 70% of our forecasted net foreign currency cash flow exposure arising in USD block, HKD, JPY, CNY 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 42: Foreign currency hedging contracts
Foreign currency hedging contracts 12 months average 12 months average versus the CHF Hedge rate to March 14 Actual rate to March14 Hedge rate to March 15 YEN 97 109 110 US $ 0.94 0.92 0.92 HK $ 8.27 8.46 8.47 CNY 6.75 6.67 6.72 Average Rates against the CHF 12 months to 31 March 2014 12 months to 3
Slide 43: FY14 sales by region
FY14 sales by region 15% Europe 8% Middle East/Africa Asia Pacific 40% 30% Americas Japan 7% 12 months €m FY14 FY13 Constant rates Actual rates Europe 3 178 2 955 + 9% + 8% Middle East/Africa 741 656 + 18% + 13% Asia Pacific 4 235 4 162 + 6% + 2% Americas 1 603 1 473 + 14% + 9% Japan 892 904 + 23% -
Slide 44: FY14 sales by business area
FY14 sales by business area 14% Jewellery Maisons 7% Specialist Watchmakers 51% Montblanc Maison 28% Other 12 months €m FY14 FY13 Constant rates Actual rates Jewellery Maisons 5 438 5 206 + 10% + 4% Specialist Watchmakers 2 986 2 752 + 13% + 9% Montblanc Maison 730 766 - 1% - 5% Other 1 495 1 426 +
Slide 45: FY14 reported operating result by business area
FY14 reported operating result by business area 12 months €m FY14 FY13 Annual change Jewellery Maisons 1 890 1 818 + 4% 72% Specialist Watchmakers 778 733 + 6% 29% Montblanc Maison 43 120 - 64% 2% Other - 80 - 38 - 111% -3% Operating contribution 2 631 2 633 - 100% Corporate costs - 212 - 207 Centra
Slide 46: FY14 Group results
FY14 Group results 12 months €m FY14 FY13 Annual change Sales 10 649 10 150 + 5% Cost of sales - 3 898 - 3 631 + 7% Gross profit 6 751 6 519 + 4% Net operating expenses - 4 332 - 4 093 + 6% Operating profit 2 419 2 426 - Net finance costs 64 - 47 - 236% Share of post-tax results of equity-accounted
Slide 47: Summary balance sheet
Summary balance sheet €m FY14 FY13 Non-current assets 4 092 3 944 Current assets 11 826 10 553 Non-current liabilities - 847 - 826 Current liabilities - 3 113 - 3 456 Equity attributable to owners of the parent company - 11 964 - 10 216 Non-controlling interests 6 1 Equity - 11 958 - 10 215 includin
Slide 48: Inventory
Inventory €m FY14 FY13 Annual change Finished goods 2 727 2 689 + 38 + 1% Raw materials and work in progress 1 728 1 637 + 91 + 6% Total 4 455 4 326 + 129 + 3% Rotation FY14 FY13 Number of months of COGS 16.9 16.7
Slide 49: Retail network
Retail network March 2014 Internal External vs PY Internal vs PY External March 2013 Montblanc 460 234 226 + 6 + 21 433 Cartier 290 195 95 + 3 - 1 288 Alfred Dunhill 234 147 87 + 1 - 1 234 Chloé 162 92 70 + 2 - 19 179 Lancel 112 73 39 - 3 - 9 124 Van Cleef & Arpels 104 70 34 + 7 - 1 98 Piaget 96 63
Slide 50: Jewellery Maisons
FY14 Jewellery Maisons L’Odyssée Collection Moderate sales growth, primarily led by South East Asia, Americas, Japan, ME/Africa and Retail Jewellery (double digit increase), mainly driven by the recently launched Paris Nouvelle Vague and iconic Love lines Steel watches and diamond studded Go
Slide 51: Jewellery Maisons
FY14 Jewellery Maisons Outstanding performance across regions and segments particularly supported by “Entre les doigts” Alhambra, Perlée and Between the Finger rings jewellery collections 2 butterflies ring Pierres de Caractère - Variations High Jewellery collection Charm and Poetic Complica
Slide 52: Main Product Launches & Events
FY14 Main Product Launches & Events Jewellery Jewellery Odyssée HJ collection Pierres de Caractère – Variations HJ Alhambra Malachite Paris Nouvelle Vague Perlée Yellow gold, September 2013 Maillon Panthère Fine Between the Finger Ring Two Butterfly pink Trinity Ruban sapphires Bri
Slide 53: Specialist Watchmakers
FY14 Specialist Watchmakers Satisfactory sales growth, primarily driven by Europe, Japan and ME/Africa. Positive sales development in all other regions Strongest growth achieved in high jewellery and jewellery fuelled notably by the Rose collection Success of iconic products confirmed Ultra-
Slide 54: Specialist Watchmakers
FY14 Specialist Watchmakers Strong growth, in particular in Europe and Americas, constrained by shortages Excellent performance of retail, positively supported by new stores in Beverly Hills, Paris, London and Shanghai Continued success of Iconic Patrimony line, strengthening of Overseas, rede
Slide 55: Main Product Launches & Events
FY14 Main Product Launches & Events Watches Watches Limelight Gala Métiers d’Art Florilège Altiplano 40mn with date Métiers d’Art Hommage à l’Art de la Danse Altiplano 1205P Patrimony Contemporaine ultra-thin calibre 1731 Malte Tourbillon high jewellery Emperador Minute Repeater Hi
Slide 56: Specialist Watchmakers
FY14 Specialist Watchmakers Solid sales across all regions except Asia Pacific Strong demand for high complications & new models Grand Complication The Grand Lange 1 New 1815 Up/Down Stores opened in Paris, Munich and Lisbon Extension of manufacturing site expected to be completed in s
Slide 57: Specialist Watchmakers
FY14 Specialist Watchmakers Substantial sales growth fuelled by All geographic areas except Japan Acceleration of the Excalibur collection with the successful launch of the new Excalibur 42 and Excalibur 36 Continued success of the Velvet line for ladies Store openings, notably in Seoul, M
Slide 58: Main Product Launches & Events
FY14 Main Product Launches & Events Watches Watches Grand Lange 1 (WG) Excalibur 42 Chronograph & Skeleton Grand Lange 1 “Lumen” Excalibur 36 on metal bracelet 1815 Up/Down Excalibur 45 Double Tourbillon Skeleton Pink Gold 1815 Rattrapante Perpetual Calendar Excalibur Knights of the
Slide 59: Specialist Watchmakers
FY14 Specialist Watchmakers Good growth across most geographies, notably Asia and the Middle East, and retail Driven by The Portuguese & Portofino lines and new Ingenieur line Five new boutiques including Dubai Mall and Seoul Galleria, leading to a total network of 42 internal boutiques Inge
Slide 60: Specialist Watchmakers
FY14 Specialist Watchmakers Commendable sales growth across products, geographies and channels sustained by Celebration of the 180th Anniversary, with the Jubilee Collection Set and events Two pillar lines: Master & Reverso – two fast growing lines: Rendez-vous & Duomètre Feminine clientele
Slide 61: Main Product Launches & Events
FY14 Main Product Launches & Events Watches Watches Master Ultra-Thin 1907 Ingenieur Automatic Master Grande Tradition QP tourbillon Ingenieur Chronograph Racer Grande Reverso ultra thin 1931 Chocolat Ingenieur Chronograph Silberpfeil Duomètre à quantième lunaire enamel Grand Feu Por
Slide 62: Specialist Watchmakers
FY14 Specialist Watchmakers Marked sales growth across most regions, especially the Middle East and Europe Productwise driven by The Manifattura Collection The Luminor 1950 3 Days and the new Radiomir 1940 and Luminor Marina 8 days Six new internal boutiques including Moscow and Dubai, lea
Slide 63: Specialist Watchmakers
FY14 Specialist Watchmakers Notable growth in sales, primarily thanks to Europe and easier comparatives Clifton Classima and the recently launched Clifton doing well Sales in China starting to improve thanks to the joint venture with Chow Tai Fook, operational since summer 2013
Slide 64: Main Product Launches & Events
FY14 Main Product Launches & Events Watches Watches Radiomir 1940 3 days - 47mm Clifton Radiomir 8 days GMT 45mm P2002/10 Hampton Lady, two tone & double wrap-around Red Gold - 45mm Linea Automatic, 27mm Luminor Marina 8 Days - 44mm Capeland, Worldtimer Luminor Marina 1950 3 Days Aut
Slide 65: Montblanc Maison
FY14 Montblanc Maison Lower sales partially reflect reorganisation, including impact Timewalker of the South Korea integration as well as the continued World Time UTC reduction in wholesale points of sales to upgrade positioning Performance also affected by strong reliance on domestic Chinese an
Slide 66: Fashion & Accessories
FY14 Fashion & Accessories Challenging trading due to China environment and weak Yen The Maison however enjoys good awareness and appreciation worldwide New management structure in place Focus is now on Products Distribution Customer experience Gradual integration into Richemont shar
Slide 67: Main Product Launches & Events
FY14 Main Product Launches & Events Writing Instruments Leather Heritage Collection 1912 Traveller LLG Great Character Leonardo da Vinci Sherborne SLG/LLG Bourdon Colours SLG/ LLG Watches Belgrave SLG Star Roman Quantieme Complet Nicolas Rieussec Rising Hours Events Alfred Dunhill
Slide 68: Fashion & Accessories
FY14 Fashion & Accessories Subdued French market drove sales down Management team transition completed with recent appointments of a new CEO and creative director Product repositioning taking place New lines include the Lancel Shopping and Joséphine bags Supported by new advertising concep
Slide 69: Fashion & Accessories
FY14 Fashion & Accessories Low sales growth as the strength in retail, the UK, Americas and Ready-to-Wear was offset by a challenging Asia RTW is growing well Going forward, leather to become the main focus, with initial steps already in place New Baylee bag New Clare bag Two new interna
Slide 70: Main Product Launches & Events
FY14 Main Product Launches & Events Leather Leather Chloé L de Lancel Baylee bag Lancel shopping Bronte bag Joséphine Clare bag Le 48-50 September13 Leather SeeByChloé L’Essentiel January 14 Nellie bag Events Kay bag Shooting of the “L” bag by Patrick Demarchelier Daisy bag E
Slide 71: Fashion & Accessories
FY14 Fashion & Accessories Significant sales growth remains well above Group rate Driven particularly by Americas, Asia Pacific and Europe Outperformance of The Outnet and Mr Porter First year of operation of the Hong Kong distribution centre to serve the APAC region, with ‘Premier’ same day
Slide 72: Richemont
RI CHEMONT
Compagnie Financière Richemont — FY2014 Earnings Presentation on 6ix