Richemont Annual 2014 Accounts and Report Richemont Annual Report and Accounts 2014 RIC05_005 | Richemont Annual Report 2014 | Sign-off proof 2 | 28/05/2014 Richemont is one of the world’s leading luxury goods groups. The Group’s luxury goods interests encompass some of the most prestigious names in the industry, including Cartier, Van Cleef & Arpels, Piaget, Vacheron Constantin, Jaeger-LeCoultre, IWC, Alfred Dunhill, Montblanc and Net-a-Porter. Each of Our Maisons™ represents a proud tradition of style, quality and craftsmanship which Richemont is committed to preserving. 1 Financial and operating highlights 30 Regional & Central Support 32 Financial review 2 Chairman’s review 38 Corporate social responsibility 4 Business review 4 Jewellery Maisons 39 Peace Parks Foundation 5 Cartier 7 Van Cleef & Arpels 40 Laureus 8 Specialist Watchmakers 41 Corporate governance 9 A. Lange & Söhne 45 Board of Directors 10 Baume & Mercier 52 Group Management Committee 11 IWC Schaffhausen 12 Jaeger-LeCoultre 61 Consolidated financial statements 13 Officine Panerai 14 Piaget 116 Company financial statements 15 Ralph Lauren Watch and Jewelry 16 Roger Dubuis 121 Five year record 17 Vacheron Constantin 18 Montblanc Maison 123 Statutory information 19 Montblanc 124 Notice of meeting 20 Other Businesses 21 Alaïa 22 Alfred Dunhill 23 Chloé 24 Giampiero Bodino 25 Lancel 26 Net-a-Porter 27 Peter Millar 28 Purdey 29 Shanghai Tang Cautionary statement regarding 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’, ‘seek’ and similar expressions may identify forward-looking statements. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside the Group’s control. Richemont does not undertake to update, nor does it have any obligation to provide updates or to revise, any forward-looking statements. RIC05_005 | Richemont Annual Report 2014 | Sign-off proof 2 | 28/05/2014 Financial and operating highlights Group sales (€ m) Sales by business area (% of Group) 2014 10 649 2014 2013 10 150 51 % Jewellery Maisons 2012* 8 868 28 % Specialist Watchmakers 7 % Montblanc Maison 14 % Other Businesses Operating profit (€ m) Jewellery Maisons (€ m) 2014 2 419 2014 5 438 2013 2 426 2013 5 206 2012* 2 048 2012 4 590 Earnings per share, diluted basis (€) Specialist Watchmakers (€ m) 2014 3.676 2014 2 986 2013 3.595 2013 2 752 2012 2.756 2012 2 323 Dividend per share Montblanc Maison (€ m) 2014 CHF 1.40 2014 730 2013 CHF 1.00 2013 766 2012 CHF 0.55 2012 723 Other Businesses (€ m) 2014 1 495 2013 1 426 2012* 1 232 • Sales grew by 5 % to € 10 649 million; and by 10 % at constant exchange rates • Satisfactory broad-based growth • Operating profit in line with the prior year at € 2 419 million • Operating margin down to 22.7 %, primarily reflecting unfavourable exchange rate effects • Profit for the year up by 3 % to € 2 067 million, including currency hedging gains • Solid cash flow from operations of € 2 875 million • Proposed dividend of CHF 1.40 per share * Re-presented Richemont Annual Report and Accounts 2014 1 RIC05_005 | Richemont Annual Report 2014 | Sign-off proof 2 | 28/05/2014 Chairman’s review Yves-André Istel, Chairman Overview of results Maisons’ worldwide network of boutiques. There were Richemont can report a satisfactory set of results for no material business acquisitions during the year. the year ended 31 March 2014, supported by Dividend improvements in Asia Pacific, the Americas and Japan. Based upon the results for the year and in keeping Strength in the jewellery and specialist watch segments with its stated objective to grow dividends steadily offset the softness of certain fashion Maisons and over the long term, the Board has proposed a dividend Montblanc. As a result, and taking into account the of CHF 1.40 per share; up from CHF 1.00 per share substantial currency headwinds which weighed on the last year. Group’s overall performance, operating profit was in Annual General Meeting line with the prior year. It includes provisions related At last year’s Annual General Meeting (‘AGM’), to the reorganisation of Montblanc, but excludes any shareholders approved the proposed amendments to hedging gains or losses which are reported ‘below’ the the Company’s Articles of Incorporation. Consequently operating profit line of the income statement. Richemont’s ‘A’ bearer shares became ‘A’ registered Net profit increased by 3 %, including a € 214 million shares. The ‘A’ registered shares enjoy the same rights positive effect of the exchange rate hedging activities. as before, including dividend and voting rights. Voting rights may only be exercised if the owner, or its The increase in cash flow from operations reflects not nominee, has come onto the share register. The former only the significant benefits of the exchange rate ‘share blocking’ requirements of bearer shares have hedging programme, but also the Maisons’ tight disappeared following this change and have been working capital management. It allowed the Group replaced by a record date for voting at the 2014 AGM. to maintain its investment programme while strengthening its financial position: the Group’s net Our shareholders will be asked to approve the 2014 cash position at 31 March 2014 was up by € 1.4 billion compensation report in a non-binding vote. Your Board to € 4.7 billion. has listened to the issues raised last year by certain investors and has incorporated additional disclosures on Business developments pages 51 to 59 of the report. The Board believes that the The business review presented on pages 4 to 30 describes Company’s compensation arrangements for non- the year’s developments in each of our Maisons, including executive and executive directors are well aligned with the inauguration of Maison Giampiero Bodino. the interests of its shareholders. With regard to the Richemont’s Maisons will continue to pursue their ‘Minder Initiative’ voted by the Swiss people in March differentiated strategies and planned investment 2013, which has given rise to changes in Swiss company programmes. Those programmes, in their respective law, Richemont will implement the changes to its manufacturing facilities and distribution networks, are Articles of Incorporation at its 2015 AGM. Those complemented by Richemont’s shared service platforms changes will include a binding vote on the Company’s in Switzerland and around the world. compensation arrangements. During the year, Richemont completed its portfolio Mr Johann Rupert, formerly Chairman of the Board, review and concluded that shareholders’ interests did not stand for re-election at the 2013 AGM. Rather, would be best served through further investment in all he took a sabbatical year of absence from Richemont’s of the Maisons to assure their long-term prosperity. affairs. During Mr Rupert’s sabbatical year, your Underlining this commitment, gross capital spending Board appointed me as Chairman and Mr Josua amounted to € 719 million, or 7 % of sales. This was Malherbe as Deputy Chairman. Mr Johann Rupert primarily in European manufacturing, including Swiss will conclude his sabbatical year and stand for election watchmaking and French jewellery, and in the as Chairman of the Board at Richemont’s 2014 AGM. 2 Richemont Annual Report and Accounts 2014 Chairman’s review RIC05_005 | Richemont Annual Report 2014 | Sign-off proof 2 | 28/05/2014 Dr Franco Cologni, who has served the Group power of sport to improve the lives of disadvantaged exceptionally well for over 40 years and been a member young people around the world. Laureus also celebrates of the Board since 2002, will not be standing for re- sporting excellence at the annual Laureus World Sports election. However, we are fortunate that he will Awards, held most recently in Kuala Lumpur, continue to support the Maisons in a range of Malaysia. Richemont is proud to be associated with creativity- and craftsmanship-related matters. the inspiring vision of these Foundations and invites Richemont’s other independently-minded, non- you to join us in supporting their work. executive directors are standing for re-election. The Also, each of Our Maisons support the activities of wealth of their combined business experience, charitable bodies around the world. These are including the design, production and distribution of primarily in areas related to the arts, museums, luxury goods, continue to make a significant medical research, child welfare and education. contribution to the Group’s prosperity and to the superior returns enjoyed by all of Richemont’s Outlook shareholders since 1988. In the month of April, sales increased by 1 % at actual exchange rates and by 6 % at constant exchange rates. Management changes At actual rates, all regions reported sales growth Your Board includes three highly experienced and very except for Japan, where the sales tax increase became able executive directors: Messrs Bernard Fornas and effective on 1 April. The retail channel continued to Richard Lepeu, Richemont Co-Chief Executive outperform wholesale in all regions except Japan. Officers; and Mr Gary Saage, Chief Financial Officer. Excluding Japan, sales increased by 4 % at actual These three, together with Dr Frederick Mostert and exchange rates and by 8 % at constant exchange rates. the members of the Group Management Committee, have continued to implement our strategic objectives in Richemont remains focused on long-term organic the field of luxury goods. Your Board thanks them and growth and value creation for its clients, shareholders the 30 000 employees of the Group and its Maisons for and employees. We intend to achieve this objective by their dedication and hard work.