Richemont interim Operating Profit grew by 31% to Euro 436M, Net Profit grew by 37% to Euro 371M (Press Release Excerpts)
Richemont, the Swiss luxury goods group, announces its unaudited results for the six-month period ended 30 September 2006.
Highlights:
• Group sales increased by 16 per cent to € 2,303 million. The overall growth reflected strong trading in all regions and double-digit sales increases at almost all of the Group’s Maisons.
• Operating profit from Richemont’s luxury goods businesses increased by 31 per cent to € 436 million. The significant increase reflected strong sales growth, good margins and a controlled increase in expenses.
• Net profit from the parent and subsidiaries increased by 37 per cent to € 371 million.
• The Group’s share of the post-tax profit of its associated company, British American Tobacco, increased by 6 per cent to € 274 million. The Group’s share of the underlying post-tax profit from BAT before non-recurring items increased by 13 per cent.
• Group net profit increased by 22 per cent to € 645 million and earnings per unit on a diluted basis increased by 21 per cent to € 1.141.
• Excluding non-recurring gains and charges from the results for both periods, the net profit of the Group increased by 27 per cent from € 537 million to € 684 million.
• Cash generated by operations was € 235 million for the six-month period. In addition, the Group received dividends totalling € 278 million from BAT during the period. Net cash at 30 September 2006, after payment of the ordinary and special dividends of € 613 million, amounted to € 601 million.
Executive Chairman’s commentary
The Groups results for the first half of the year are excellent; all of the Maisons have performed well. These results have been achieved against a background of generally good economic conditions in most of our principal markets.
Richemont’s sales increased by 16 per cent and margins have improved, resulting in operating profit increasing by 31 per cent to € 436 million for the sixmonth period. Turnover has been driven by strong growth in retail sales. Sales of jewellery, a business area where Richemont is very well placed, have increased by 20 per cent. Growth in operating expenses was restricted to 9 per cent, below the rate of increase in sales; costs are being closely monitored.
Operating performance
All of the Maisons have performed well in terms of sales. Losses were more than halved at Alfred Dunhill and Lancel and profitability improved across the other Maisons.
The Jewellery Maisons – Cartier and Van Cleef & Arpels – saw sales increase by 13 per cent, with an excellent performance by Van Cleef & Arpels, albeit from a much smaller base than Cartier. Cartier saw strong demand for its high jewellery lines, in particular, as well as the Love jewellery range and new watches such as La Doña and the Pasha Seatimer.
Sales of the Group’s Specialist Watchmakers grew by 14 per cent during the period, with excellent performances reported by Panerai, A. Lange & Söhne and Piaget. Following the marked success of its 250th anniversary in 2005, Vacheron Constantin’s sales grew
more modestly than its peers during the period, as anticipated.
For the Swiss watch industry as a whole, the growth in sales in recent years has led to a strong increase in demand for high quality mechanical movements. Richemont is working with other industry participants in terms of training programmes for new watchmakers
and is expanding the Maisons’ manufacturing capacity. However, the growth in demand may lead to future capacity constraints in the industry which could limit growth in certain product areas over the next few years.
The Writing Instrument Maisons saw sales increase by 24 per cent. Montblanc benefited from sales of new products and special editions linked to its centenary year and the Maison’s first silver jewellery line for women as well as the further extension of its retail
distribution network. Montblanc is now certainly established as a global luxury goods business.
The performance of the Leather and Accessories businesses has been encouraging. At Alfred Dunhill, sales increased by some 11 per cent. The retail distribution network in China, which was acquired at the beginning of the year, has contributed to this growth. Operating losses at the Maison have been significantly reduced during the period under review. Lancel also saw its sales increase and its losses
reduced during the period.
After a year of dramatic growth last year, Chloé has once again doubled its sales during the period under review. This achievement can be attributed to the uniqueness of Chloé’s designs and the broadening of its product ranges, complemented by further retail store openings.
Reflecting the balanced geographic spread of Richemont’s businesses, all regions reported good growth during the period.
The Asia-Pacific region has continued to show the strongest performance with growth of 18 per cent at actual exchange rates. Group sales in China grew by 64 per cent during the period, complementing the good growth seen in more established markets in the region.
Sales in Europe increased by 18 per cent, with excellent performances in France and the United Kingdom supported by very strong growth in new markets such as Russia and Eastern Europe. The Americas also performed well, with sales growing by 17 per cent in euro terms at actual exchange rates. In Japan, growth of 14 per cent in local currency terms - driven by particularly good performances from Van Cleef & Arpels, IWC, Panerai and Montblanc - was reduced to 6 per cent at actual exchange rates as a consequence of the progressive weakening of the yen against the euro during the period.
British American Tobacco
Excluding restructuring charges and one off items in both periods, the Group’s share of BAT’s results increased by 13 per cent in euro terms compared to the first six months of last year and BAT contributed some € 274 million to the Group’s net profit for the period. BAT management continue to develop the business and to eliminate costs from its operations.
Over the last six months, our interest of just under 20 per cent in BAT has generated dividends of € 278 million for Richemont and the board of BAT has committed to return a high proportion of profits to shareholders each year.
Outlook for the year
During the first half of the year Richemont has benefited from strong demand in its major markets. The Group has a globally diversified clientele and has demonstrated its capacity to develop quickly in new market areas – for example in China and Russia – at the same time as achieving good growth in established markets.
The high rate of growth seen during the first six months has eased in the month of October, with overall sales growing by 11 per cent at actual exchange rates. Whilst the Asia-Pacific region and the Americas both continued to grow at 17 per cent, sales in Europe grew
by 10 per cent. In Japan sales grew by 10 per cent in local currency terms but on translation into euros sales were only marginally above October 2005 figures.
The growth in retail sales seen during the first six months has been maintained indicating continued strong consumer demand.
Whilst it is dangerous to read too much into the results of any one month, the October figures are reasonably ncouraging in the run up to the important pre-Christmas trading season. However, the strong performance seen in the second half of last year does
mean that the comparative figures are challenging. Within the organisation, we will continue to monitor costs closely, with a view to optimising operating margins and, overall, I remain confident that the Group’s performance for the year as a whole will be significantly ahead of last year.
Johann Rupert
Executive Chairman
Geneva, 17 November 2006