Compagnie Financiere Richemont Sa · SIX:CFR
Compagnie Financiere Richemont Sa — FY2016 Earnings Presentation
54 slides from Compagnie Financiere Richemont Sa's earnings presentation, May 2016
Slide 1: FY16 Annual Results
FY16 ANNUAL RESULTS AS AT 31 MARCH 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: FY16 Results
FY16 RESULTS › Highlights › Review of Operations › Financial Review › Strategic Directions & Conclusion › Q&A Session
Slide 4: FY16 Key Figures
FY16 KEY FIGURES › Difficult year due to a significantly deteriorated H2 environment Sales In € million › Reported sales* up 6%, organic -1% FY16 11 076 FY15 10 410 › Operating profit* down to €2 061m Comparable operating profit In € million €234m one off gain in FY15 FY16 19.5% 2 158 €97m one o
Slide 5: Review of Operations Excluding Net-a-Porter
Review of Operations Excluding Net-a-Porter
Slide 6: Sales in Europe
FY16 SALES IN EUROPE › Strong basis of comparison › Volatile year Strong H1 supported by increased tourism driven by weak euro Weak H2 impacted by safety concerns and deteriorated feel good factor 3 388 3 067 8% 9% Europe 16% Asia Pacific 31% Americas Japan Middle East/Africa FY FY 15 16 36% in
Slide 7: Sales in Asia Pacific
FY16 SALES IN ASIA PACIFIC › Double digit sales decline, still contrasted Hong Kong and Macau remain significantly negative Mainland China continues to improve, posting 10% growth 4 100 3 937 9% 8% Europe Hong Kong 16% China 31% Rest of Asia Americas 14% Japan FY FY Middle East/Africa 15 16 in €
Slide 8: Sales in Americas
FY16 SALES IN AMERICAS › Strong comparatives › Sales affected by an uncertain environment and strong currency Difficult for watches Good momentum continuing at Chloé and Peter Millar 1 745 1 588 9% 8% Europe 16% Asia Pacific Americas 31% Japan Middle East/Africa FY FY 15 16 in €m 36% -1% change
Slide 9: Sales in Japan
FY16 SALES IN JAPAN › Exceptional double digit growth Driven by easy comparatives and exceptionally weak yen favourably impacting level of tourism Strong performance of jewellery and watches 1 031 814 9% 8% Europe 16% Asia Pacific Americas 31% Japan Middle East/Africa FY FY 15 16 36% in €m +20%
Slide 10: Sales in the Middle East and Africa
FY16 SALES IN THE MIDDLE EAST AND AFRICA › Slower growth Challenging comparatives Unfavourable currencies driving lower tourism Resilient domestic clientele despite lower oil prices 975 841 9% 8% Europe Asia Pacific 16% Americas 31% Japan Middle East/Africa FY FY 15 16 36% in €m +2% change at
Slide 11: Sales by Network
FY16 SALES BY NETWORK › Resilient retail sales overall 22 new internal boutiques › Marked decline in wholesale Difficult conditions in Hong Kong, Macau, Korea and the Americas Persisting weakness in the wholesale channel Retail Wholesale 6 142 4 974 4 934 5 436 FY FY FY FY 15 16 15 16 in €m in
Slide 12: Sales by Product Line
FY16 SALES BY PRODUCT LINE › Watches, down high single digit 4% 5% Primarily affected by wholesale 4% 46% Watches in Asia Pacific and the Americas 6% Jewellery Leather Goods › Jewellery, high single digit momentum Clothing › Leather goods and clothing, good growth 35% Writing Instruments Other C
Slide 13: Maisons Highlights
FY16 MAISONS HIGHLIGHTS › The Jewellery Maisons, impacted by one off charges, generated a contribution margin of 31% › The Specialist Watchmakers’ contribution margin declined to 16%, impacted by weak demand in parts of Asia Pacific and the Americas, a strong Swiss franc and one off charges › Improv
Slide 14: Performance – Jewellery Maisons
FY16 PERFORMANCE – JEWELLERY MAISONS › High single digit increase in reported sales Thanks to jewellery and a weak euro Watches down, in particular in Hong Kong, Macau and the Americas › 31% margin contribution €24m one off charges relating to Cartier watches 12 months €m FY16 FY15 Actual rate
Slide 15: Performance – Specialist Watchmakers
FY16 PERFORMANCE – SPECIALIST WATCHMAKERS › Mid single digit increase in sales reflects weak euro and softer organic sales › Lower operating contribution Difficult environment in Hong Kong, Macau and the Americas Strong CHF €24m one off charges 12 months €m FY16 FY15 Actual rates Sales 3 225 3
Slide 16: Performance – Other
FY16 PERFORMANCE – OTHER › Sales up double digit Good performance of Montblanc, Chloé, Peter Millar and Azzedine Alaïa Deterioration at Alfred Dunhill and Lancel › Comparable losses at €62m broadly in line €234m one off gain in FY15 €33m one off charges in FY16 12 months €m FY16 FY15 Actual
Slide 17: Financial Review
Financial Review RICHEMONT
Slide 18: Operating Profit
FY16 OPERATING PROFIT › 23% decrease in operating profit Lower gross margin Comparable operating profit down 11% Annual 12 months €m FY16 FY15 change Sales 11 076 10 410 6% Gross profit 7 118 6 876 4% Net operating expenses -5 057 -4 206 20% Selling and distribution expenses -2 950 -2 554 16% Co
Slide 19: Gross Profit
FY16 GROSS PROFIT › 4% increase in gross profit Positive: higher share of retail Negatives: foreign exchange effects one off charges of €67m 7 118 6 876 66.1% +4% -180bps 64.3% FY FY FY FY 15 16 15 16 in €m as a % of sales
Slide 20: Operating Expenses
FY16 OPERATING EXPENSES › Increase of 14% reflects +14% Strong CHF +8ppts 5 057 Higher rentals and depreciation +4ppts €30m of one off charges +2ppts 4 440 5 057 OPEX 4 440 FY15 New A&P Other FX FY16 Boutiques +16% 2 950 2 554 +8% +14% 1 010 1 093 874 992 2 22 FY FY FY FY FY FY FY FY FY FY 15
Slide 21: Net Finance Income and Costs
FY16 NET FINANCE INCOME AND COSTS › Substantial increase in net finance income reflecting Non recurrence of €652m of non cash charges in prior year Reduction in hedging losses Annual 12 months €m FY16 FY15 change Financial expense, net -7 -28 +21 Net foreign exchange gains/(losses) on monetary i
Slide 22: Profit for the Year
FY16 PROFIT FOR THE YEAR › Substantial net profit increase reflects Reversal in finance costs Non cash gain of €639m on merger of Net-a-Porter with Yoox Annual 12 months €m FY16 FY15 change Operating profit 2 061 2 670 -23% Net finance income/(costs) 2 -953 Share of post-tax results of equity-ac
Slide 23: Cash Flow from Operations
FY16 CASH FLOW FROM OPERATIONS* › Solid cash flow from operations Well controlled inventory investments in jewellery FY16 2 419 FY15 2 387 Sound receivables portfolio Annual 12 months €m FY16 FY15 change Operating profit 2 061 2 670 -609 Operating (loss)/profit from discontinued operations -91 1
Slide 24: Capital Expenditure
FY16 CAPITAL EXPENDITURE* › Over €3bn invested over the last 5 years › Peak reached in FY15 and FY16 Jaeger-LeCoultre – London flagship 708 710 6.3% 6.1% IWC – Rodeo Drive, Beverly Hills flagship FY FY FY FY 15 16 15 16 Gross in €m as a % of sales * including discontinued operations Lancel – Cannes
Slide 25: Capital Expenditure breakdown
FY16 CAPITAL EXPENDITURE €708m › Significant investments in distribution €710m 44% of Group capex 44% Retail Retail 46% Chloé – Dubai Mall 26% Manufacturing Manufacturing 24% Van Cleef & Arpels – London, New Bond Street Other 30% 30% Other FY15 FY16 Cartier – Beijing, Shin Kong Place
Slide 26: Free Cash Flow
FY16 FREE CASH FLOW* › Substantially higher when investment property disposal gain is excluded Despite drop in operating profit on a recurring basis Annual 12 months €m FY16 FY15 change Cash flow from operations 2 419 2 387 32 Net change in tangible assets -613 -585 -28 Net change in intangible as
Slide 27: Balance Sheet Strength
BALANCE SHEET STRENGTH €20.1bn €20.1bn Fixed assets 17% Other non-current assets 12% 75% Total equity Inventory 26% Other current assets 6% Investments in money market and externally 16% managed funds 4% Non-current liabilities Cash 23% 21% Current liabilities Assets Equity and liabilities
Slide 28: YOOX Net-a-Porter Group Investment
YOOX NET-A-PORTER GROUP INVESTMENT › Stake of 65 599 597 shares as of 31 March 2016 49% following completion of capital increase 25% voting rights › €1 165m carrying value as of 31 March 2016 €1 769m market value €49m gain relating to capital increase (FY17)
Slide 29: Dividends
DIVIDENDS › FY16 dividend of CHF1.70 per share › Increase of 6% in CHF terms › In line with objective to grow dividends over the long term
Slide 30: April 2016 Sales
APRIL 2016 SALES › -15% at constant currencies; -18% reported +9% reported, -8% at constant currencies in April 2015 Persistent weakness in Hong Kong & Macau Weakness in Europe and Japan Yet mainland China up by 26% at constant currency, +16% reported › Difficult, but as anticipated
Slide 31: Strategic Directions & Conclusion
Strategic Directions & Conclusion
Slide 32: Strategic Directions and Conclusion
STRATEGIC DIRECTIONS AND CONCLUSION › Cash flow generation, a key priority in a slow growth environment Productivity of retail network Production levels and stock rotation › Strategic investments Talent Products › Healthy return on operating assets › Long term vision and confidence in the ma
Slide 33: Q&A Session
Q&A Session RICHEMONT
Slide 34: Appendix
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Slide 35: Financial Highlights
FINANCIAL HIGHLIGHTS Sales* Gross profit* Operating profit* € million € million € million 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% 10 023 FY14 65% 6 491 FY14 24% 2 427 FY13 14% 10 150 FY13 64% 6 519 FY13 24% 2 426 FY12 29% 8 868 FY12 64% 5 65
Slide 36: 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 37: Sales by Region and Business Area
FY16 SALES BY REGION AND BUSINESS AREA Constant Actual 12 months €m FY16 FY15 rates* rates Europe 3 388 3 067 +10% +10% 31% Middle East/Africa 975 841 +2% +16% 8% Asia Pacific 3 937 4 100 -13% -4% 36% Americas 1 745 1 588 -1% +10% 16% Japan 1 031 814 +20% +27% 9% Total sales 11 076 10 410 -1% +6% 10
Slide 38: Operating Result by Business Area
FY16 OPERATING RESULT BY BUSINESS AREA Annual 12 months €m FY16 FY15 change Jewellery Maisons 1 892 1 975 -4% Specialist Watchmakers 520 730 -29% Other -94 170 NR Operating contribution 2 318 2 875 -19% Corporate costs -257 -205 +25% Central support serv ices -239 -190 +26% Other operating (expense)
Slide 39: Group Results
FY16 GROUP RESULTS Annual 12 months €m FY16 FY15 change Sales 11 076 10 410 +6% Cost of sales -3 958 -3 534 +12% Gross profit 7 118 6 876 +4% Net operating expenses -5 057 -4 206 +20% Operating profit 2 061 2 670 -23% Net finance income/(costs) 2 -953 Share of post-tax results of equity-accounted in
Slide 40: Summary Balance Sheet and Inventory
SUMMARY BALANCE SHEET AND INVENTORY €m FY16 FY15 Non-current assets 5 767 4 522 Current assets 14 358 15 928 Non-current liabilities -882 -942 Current liabilities -4 196 -5 088 Equity attributable to owners of the parent company 15 047 14 421 Non-controlling interests - -1 Equity 15 047 14 420 inclu
Slide 41: Retail Network
RETAIL NETWORK vs Annual change FY16 Internal External FY15 Internal External Montblanc 573 272 301 537 1 35 36 Cartier 279 197 82 286 -4 -3 -7 Alfred Dunhill 192 144 48 214 -2 -20 -22 Chloé 170 97 73 171 -2 1 -1 Van Cleef & Arpels 116 78 38 105 5 6 11 Piaget 97 68 29 94 4 -1 3 Lancel 84 70 14 102 1
Slide 42: Jewellery Maisons
FY16 JEWELLERY MAISONS › Decline in watch sales weighed on good jewellery sales Underperformance of watches in wholesale in Asia Pacific & Americas Positive watch momentum in retail in mainland China Jewellery sales buoyant across all price points, supported by successful launches (from Cartie
Slide 43: Jewellery Maisons
FY16 JEWELLERY MAISONS › Very good performance All regions grew excluding a stable Americas Driven by jewellery across price points (from Alhambra to Seven Seas) › Continued qualitative retail development Two Butterfly Between the Finger Ring Retail (internal & external) only business model
Slide 44: Main Product Launches
FY16 MAIN PRODUCT LAUNCHES › Jewellery › Jewellery Royal and Etourdissant HJ collections Seven Seas HJ collection Diamants de Cartier Two Butterfly Tsavorites Paris Nouvelle Vague – new references Sweet Alhambra Panthère de Cartier Bridal Félicité wedding band Amulette de Cartier ›
Slide 45: Specialist Watchmakers
FY16 SPECIALIST WATCHMAKERS › Lower watch sales reflecting strong › Asia Pacific and Americas weighed exposure to HK & Macau on the good performance of › Strong growth in jewellery (Secrets Europe, Japan and Middle East & Lights, Possession relaunch) driven by Chinese tourism › Continued roll out of
Slide 46: Specialist Watchmakers
FY16 SPECIALIST WATCHMAKERS › Declining sales in Asia Pacific and › Impacted by HK & Macau Americas partially offset by strong sales in Europe and Japan › Good market reception of the new Excalibur Spider Tourbillon range › Good performance of the 1815 and Richard Lange families › Growing appeal to
Slide 47: Specialist Watchmakers
FY16 SPECIALIST WATCHMAKERS › Asia Pacific continues to offset › Growth across channels good European performance › Driven by the rejuvenated › Solid performance of high Portugieser and Portofino lines complications offer and feminine line Rendez-vous › New boutiques include Seoul, Milan and relocat
Slide 48: Specialist Watchmakers
FY16 SPECIALIST WATCHMAKERS › Good performance in a difficult › Growth in Europe and Middle East environment thanks notably to the Luminor collection › Resilient Classima and Clifton collections; good reception of new › First e-commerce site in the USA Capeland Shelby Cobra › Further consolidation o
Slide 49: Main Product Launches
FY16 MAIN PRODUCT LAUNCHES › Watches › Harmony – 260th Anniversary collection Altiplano – new references › Métiers d’Art – new references Limelight Stella › Overseas – relaunch › Jewellery Mediterranean Garden and Secrets & Lights HJ collections Possession – new references › Datograph perpet
Slide 50: Main Product Launches
FY16 MAIN PRODUCT LAUNCHES › Geophysic Universal Time › Portugieser – new references › Rendez-vous – new references › Portofino – new references › Reverso – new references › Luminor 1950 – new references › Classima – new references › Radiomir 8 Days – new references › Capeland Shelby Cobra › Mare No
Slide 51: Other
FY16 OTHER › Good organic sales growth › Excellent performance across Leather strongest growth driver channels, product lines and most geographies Resilient watches and writing instruments; successful new › Investments concentrated on Montblanc M line boutique renovations and new › Good retail p
Slide 52: Other
FY16 OTHER › Western markets and Japan › Non qualitative accounts closed; continued to grow while Asia difficult trading in France Pacific remains challenging; China particularly impacted by lower › Mitigating positive impact of the roll menswear sales out of the new boutique concept › E- commerce l
Slide 53: Main Product Launches
FY16 MAIN PRODUCT LAUNCHES › Writing Instruments › Albany LLG Montblanc M › Grooming collection – launch › Watches › Welted shoe collection – launch Montblanc 4810 Montblanc 1858 › Leather Meisterstück Sfumato Montblanc Sartorial › Charlie – new references › Leather › Huit Drew › Pop F
Slide 54: Richemont
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