Richemont Annual Annual Report and Accounts 2012 Report and Accounts 2012 RIC01_005 | Richemont Annual Report 2012 | Sign-off proof 2 | 25/05/2012 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 28 Financial review A detailed commentary on the Group’s 2 Executive Chairman and financial performance Chief Executive Officer’s review 34 Corporate responsibility 4 Business review 35 Peace Parks Foundation 4 Jewellery Maisons 5 Cartier 38 Corporate governance 7 Van Cleef & Arpels 42 Board of Directors 8 Specialist Watchmakers 47 Group Management Committee 9 A. Lange & Söhne 10 Baume & Mercier 53 Consolidated financial statements 11 IWC 12 Jaeger-LeCoultre 108 Company financial statements 13 Officine Panerai 14 Piaget 113 Five year record 15 Ralph Lauren Watch & Jewelry 16 Roger Dubuis 115 Statutory information 17 Vacheron Constantin 116 Notice of meeting 18 Montblanc Maison 19 Montblanc 20 Other Businesses 21 Alfred Dunhill 22 Azzedine Alaïa 23 Chloé 24 Lancel 25 Net-a-Porter 26 Purdey 27 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_005 | Richemont Annual Report 2012 | Sign-off proof 2 | 25/05/2012 Financial and operating highlights Group sales (€ m) Sales by business area (% of Group) 2012 8 867 2012 2011 6 892 52 % Jewellery Maisons 2010 5 176 26 % Specialist Watchmakers 8 % Montblanc Maison 14 % Other Businesses Operating profit (€ m) Jewellery Maisons (€ m) 2012 2 040 2012 4 590 2011 1 355 2011 3 479 2010 830 2010 2 688 Earnings per share from continuing operations (€) Specialist Watchmakers (€ m) 2012 2.756 2012 2 323 2011 1.925 2011 1 774 2010 1.076 2010 1 353 Dividend per share Montblanc Maison (€ m) 2012 CHF 0.55 2012 723 2011 CHF 0.45 2011 672 2010 CHF 0.35 2010 551 Other Businesses (€ m) 2012 1 231 2011 967 2010 584 • Sales increased by 29 % to € 8 867 million at actual exchange rates and by 30 % at constant currency. • Operating profit rose by 51 % to € 2 040 million. • Operating margin reached 23 % of sales. • Healthy cash flow generated from operations: € 1 789 million. • Proposed dividend: CHF 0.55 per share, representing an increase of 22 %. Richemont Annual Report and Accounts 2012 1 RIC01_005 | Richemont Annual Report 2012 | Sign-off proof 2 | 25/05/2012 Executive Chairman and Chief Executive Officer’s review Johann rupert, ExecutivE Chairman AnD Chief ExecutivE Officer OVERVIEW OF RESULTS DIVIDEND We are pleased to report that Richemont has achieved strong Based upon the good results for the year, the Board has proposed sales growth across all segments and all geographic regions, an ordinary dividend of CHF 0.55 per share. This represents an despite a volatile and diverse economic environment. increase of 22 % compared to last year. The Group’s Jewellery Maisons and its Specialist Watchmakers BUSINESS DEVELOPMENTS have reported record sales and profits, despite the strength of During the year, our Maisons made further, substantial the Swiss franc and the rising cost of precious materials and investments in their own watch and jewellery-making facilities. input costs. Montblanc continued to grow and reported increased Increasingly, in-house innovation and manufacturing is expected profits. Richemont’s Fashion and Accessories Maisons also from fine watchmakers and fine jewellers. In-house manufacturing performed well. net-a-Porter continues to enjoy sales growth also helps our Maisons react quickly to changes in the economic above the Group average, while at the same time investing in environment. The hiring and training of skilled craftsmen and structural expansion. women that follow from this internalisation of manufacturing is most notable in Switzerland, where we now employ some Further to the announcement in January, the Group’s operating 7 700 people. profit is significantly higher than the prior year: at € 2 040 million it is 51 % above last year’s level. Around the world, our network of dedicated boutiques increased by 72, primarily in mainland China, while in Europe and the These performances reflect the commitment and efforts of all United States, many of our Maisons’ existing boutiques were our colleagues, the strength of our Maisons and the leverage renovated. In parallel, we have continued to strengthen our watch provided by the Group’s shared services. distribution network, with fewer partners but more partnership. 2 Richemont Annual Report and Accounts 2012 Executive Chairman and Chief Executive Officer’s review RIC01_005 | Richemont Annual Report 2012 | Sign-off proof 2 | 25/05/2012 RIC01_005 | Richemont Annual Report 2012 | Sign-off proof 2 | 25/05/2012 Behind the scenes, the integration of supply chain processes and The enduring appeal and the development potential of each Group-wide IT systems continued to improve customer service of our Maisons lead us to focus our investment on the Group’s through better product availability and shorter delivery times. organic growth. Investments are primarily dedicated to the In this regard, the Group’s distinct businesses – our jewellers and expansion and integration of the Maisons’ respective manufacturing watchmakers, our fashion houses and Net-a-Porter – have specific facilities, as well as growth in their retail networks. Selective operating requirements. Accordingly, tailored IT solutions have boutique openings will be focused in growth markets and in been developed that suit their respective needs. tourist destinations around the world. PEaCE PaRKS FOUNDaTION Our Maisons remain entrepreneurial and innovative businesses On pages 35 to 37 of this report, you will be able to read more at heart. More than ever, we are convinced of their resilience about the commendable work of the Peace Parks Foundation and long-term prospects. We therefore look forward to the over the past 15 years. Richemont is proud to be associated future with cautious optimism. with the inspiring vision of creating and protecting a network of ecosystems that traverse Southern Africa’s artificial political borders. We invite you to join Richemont in supporting the Foundation’s work. OUTLOOK JOhann Rupert Although sales in the month of April were 29 % above the Executive ChairmaN and Chief Executive Officer comparative period, or 20 % at constant exchange rates, we are mindful of the unstable economic environment, particularly Compagnie Financière Richemont Sa in the euro zone. GENEVa, 16 MaY 2012 Richemont Annual Report and Accounts 2012 3 Executive Chairman and Chief Executive Officer’s review RIC01_005 | Richemont Annual Report 2012 | Sign-off proof 2 | 25/05/2012 RIC01_005 | Richemont Annual Report 2012 | Sign-off proof 2 | 25/05/2012 Jewellery Maisons Key results Sales (€ m) 2012 4 590 2011 3 479 2010 2 688 Operating profit (€ m) 2012 1 510 2011 1 062 2010 742 Percentage of Group sales 2012 Jewellery Maisons 52 % Richemont’s Maisons 4 Richemont Annual Report and Accounts 2012 Business review RIC01_005 | Richemont Annual Report 2012 | Sign-off proof 2 | 25/05/2012 RIC01_005 | Richemont Annual Report 2012 | Sign-off proof 2 | 25/05/2012 Established 1847 13 rue de la Paix Paris France Chief Executive Bernard Fornas Finance Director François Lepercq www.cartier.com The Maison Cartier, with over 160 years of rich history, stands out as the quintessential Luxury Maison defining the notion of true timeless luxury. Often referred to as ‘the King of Jewellers and the Jeweller of Kings’, the success of Cartier lies with its ability to strike a delicate balance between being known by many, owned by few and dreamt about by all. The creativity and distinctive style which have been at the heart of the Maison’s • The Sortilèges collection, presented on-going leadership in jewellery were once in Rome, featured 70 unique pieces again highlighted during the unveiling of • In fine watchmaking, métier d’art the latest Cartier High Jewellery collection. techniques were used for the first time The Sortilèges collection, presented in • Larger, better located flagship Rome to a select group of connoisseurs and boutiques were opened clients, demonstrated the Maison’s great artistic energy as well as the strength of its manufacture. With no less than 70 unique Cartier’s great creative flair in jewellery was pieces inspired by the universe of fragrances matched by a recognised tour de force in fine with Mediterranean colours and scents, watchmaking. Launched at the 22nd edition of Cartier has caught the imagination of many