Richemont Annual Annual Report and Accounts 2013 Report and 25 years Accounts 2013 RIC01_010 | Richemont Annual Report 2013 | Sign-off proof 3 | 29/05/2013 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 32 Regional & Central Support 34 Financial review 2 Chairman’s review A detailed commentary on the Group’s financial performance 4 Richemont’s 25th anniversary 40 Corporate responsibility 7 Business review 7 Jewellery Maisons 41 Peace Parks Foundation 8 Cartier 10 Van Cleef & Arpels 42 Laureus 11 Specialist Watchmakers 43 Corporate governance 12 A. Lange & Söhne 47 Board of Directors 13 Baume & Mercier 54 Group Management Committee 14 IWC Schaffhausen 15 Jaeger-LeCoultre 61 Consolidated financial statements 16 Officine Panerai 17 Piaget 120 Company financial statements 18 Ralph Lauren Watch and Jewelry 19 Roger Dubuis 125 Five year record 20 Vacheron Constantin 21 Montblanc Maison 127 Statutory information 22 Montblanc 128 Notice of meeting 23 Other Businesses 24 Alfred Dunhill 25 Azzedine Alaïa 26 Chloé 27 Lancel 28 Net-a-Porter 29 Peter Millar 30 Purdey 31 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. RIC01_010 | Richemont Annual Report 2013 | Sign-off proof 3 | 29/05/2013 Financial and operating highlights Group sales (€ m) Sales by business area (% of Group) 2013 10 150 2013 2012* 8 868 51 % Jewellery Maisons 2011 6 892 27 % Specialist Watchmakers 8 % Montblanc Maison 14 % Other Businesses Operating profit (€ m) Jewellery Maisons (€ m) 2013 2 426 2013 5 206 2012* 2 048 2012 4 590 2011 1 355 2011 3 479 Earnings per share, diluted basis (€) Specialist Watchmakers (€ m) 2013 3.595 2013 2 752 2012 2.756 2012 2 323 2011 1.925 2011 1 774 Dividend per share Montblanc Maison (€ m) 2013 CHF 1.00 2013 766 2012 CHF 0.55 2012 723 2011 CHF 0.45 2011 672 Other Businesses (€ m) 2013 1 426 2012* 1 232 2011 967 • Sales increased by 14 % to € 10 150 million and by 9 % on a constant basis • Solid growth across segments, regions and channels • Operating profit increased by 18 % to € 2 426 million • Operating margin gained 80 basis points to reach 24 % • Profit for the year rose by 30 % to € 2 005 million • Cash flow from operations of € 1 944 million • Proposed dividend of CHF 1.00 per share * Re-presented Richemont Annual Report and Accounts 2013 1 RIC01_010 | Richemont Annual Report 2013 | Sign-off proof 4 | 06/06/2013 Chairman’s review Johann Rupert, Chairman Overview of results The Group also acquired Peter Millar LLC, a US-based We are pleased to report that Richemont has achieved international apparel business and a retail investment solid sales growth across all segments, geographic property in New York: that property is independent regions and channels during the year. from Richemont’s property fund. These acquisitions complement the Group’s long-term investment plans. The Jewellery Maisons and the Specialist Watchmakers The year under review saw capital investment of have reported remarkable growth in sales and profits, € 612 million, primarily in manufacturing facilities despite the continuing strength of the Swiss franc and and boutiques. historically high cost of precious metals and stones. Among our other Maisons, Net-a-Porter continues to Dividend enjoy sales growth above the Group average. Based upon the good results for the year, the Board has Montblanc and the Fashion and Accessories Maisons proposed a dividend of CHF 1.00 per share. grew in the mid-single digits, reflecting challenging 25 years conditions in their major markets. On the following pages, we present a summarised The Group’s operating profit was 18 % higher than the history of Richemont’s first 25 years. As custodians of prior year. The net profit increase of 30 % was largely investors’ capital and trust, your Board has prudently achieved due to the non-recurrence of non-cash charges developed its initial businesses, acquired others, and, related to the strengthening of the Swiss franc in the when the time was right, disposed of businesses and previous year. exited from certain industries. Looking back, it has been a journey of growth and transformation. At the These performances reflect the commitment and time, it felt like a marathon of successive sprints. efforts of all our colleagues, the strength of our Maisons and the efficiencies provided by the Group’s Over this period, the Richemont share price, adjusted shared service platforms. for share splits and the 2008 reorganisation, increased from CHF 2.20 on 12 October 1988 to CHF 74.50 on Business developments 31 March 2013. Moreover, the 2008 reorganisation saw The Business Review presented on pages 7 to 33 describes the distribution of shares in Reinet Investments SCA the year’s developments in each of our Maisons. and British American Tobacco PLC, both publicly- Recognising their potential for organic growth, we traded companies, to Richemont’s investors. Taking continue to invest in their production, marketing and into account the relevant value of the three shares held distribution and the fruits of those investments are at 31 March 2013 and the respective dividends paid out reflected in the results. In parallel, Richemont is also by each of them to a founding Richemont investor, total investing in the shared service platforms which support shareholder returns amounted to CHF 120.38 from our Maisons around the world, and in its specialist an initial investment of CHF 5.10 in 1988. This equates functions such as legal, IT and financial services. to an internal rate of return of 15.3 % in Swiss franc- Operating ‘behind the scenes’, these local platforms and terms or 24.1 % in South African rand-terms. global functions enable our Maisons to improve customer service, for example through better product availability Richemont’s history does not end here, but we can and shorter delivery times. draw breath, look back and take stock of what we have achieved for our investors. However, our quarter- During the year, a number of business acquisitions century history simply pales when compared to our were completed, amounting to € 474 million in total. Maisons and their combined history of more than two Richemont acquired Varin-Etampage & Varinor millennia. For example, Vacheron Constantin alone (‘VV SA’), a Swiss manufacturer of precious metal has been in continuous production for more than products for the watch and jewellery industry, and 250 years, ever faithful to its founder’s motto, Antica Ditta Marchisio SpA, an Italian company “do better if possible, and that is always possible”. specialising in the production of hand-crafted jewellery. 2 Richemont Annual Report and Accounts 2013 Chairman’s review RIC01_010 | Richemont Annual Report 2013 | Sign-off proof 4 | 06/06/2013 RIC01_010 | Richemont Annual Report 2013 | Sign-off proof 4 | 06/06/2013 Annual General Meeting In May 2013, Ms Martha Wikstrom resigned from her Your Board has noted that certain shareholders did not role as Chief Executive Officer of Richemont Fashion exercise their voting rights at last year’s Annual and Accessories. She will serve as a non-executive General Meeting (‘AGM’) due to ‘share blocking’ director until the AGM. A member of the Board since requirements. These require Richemont’s bearer shares 2005, the other directors warmly thank her for to be blocked in the days prior to the general meeting. positioning our fashion and accessories businesses for In line with changes introduced by other leading Swiss prosperous growth. companies, at this year’s AGM your Board will A number of changes to the Group Management propose amendments to the Company’s Articles of Committee took place during the year, reflecting Incorporation to move from ‘A’ bearer shares to changing roles both inside and outside the Group. ‘A’ registered shares. Accordingly, the SIX Swiss Your Board thanks again those who no longer serve on Exchange-traded shares shall be defined as ‘A’ the Committee, those who continue to serve, and those registered shares. They will enjoy the same rights as who joined the Committee in November 2012. Further the ‘A’ bearer shares, including dividend and voting details of these changes may be found on pages 52, 54 rights. ‘Share blocking’ requirements will disappear and 55. and be replaced by a record date for voting at subsequent AGMs. Peace Parks Foundation and Laureus On pages 41 and 42, you may read about the commendable Our shareholders will be asked to approve the 2013 work of the Peace Parks Foundation and the Laureus compensation report in a non-binding vote. Your Sport for Good Foundation (‘Laureus’). In less than 20 Board has listened to the issues raised last year by years, the Peace Parks Foundation has created and certain investors and, through additional disclosures continues to protect a network of vast ecosystems that on pages 53 to 60, has sought to resolve many of those traverse Southern Africa’s political borders.