12 May 2023
Group highlights
- Group sales and operating profit at an all-time high of € 19 953 million and € 5 031 million, respectively
- Increased proposed dividend of CHF 2.50 per 1 ‘A’ share / 10 ‘B’ shares and additional special dividend of CHF 1.00 per ‘A’ share/10 ‘B’ shares
- Appointment of Chief People Officer and CEO of Regions as well as Chief Sustainability Officer to the Senior Executive Committee
- Continued progress on ESG commitments: 97% renewable electricity achieved globally, and polyvinyl chloride (PVC) removed from products and packaging
- Strategic agreement with FARFETCH and Alabbar to create a neutral industry-wide platform and advance the realisation of the Group’s Luxury New Retail vision; YNAP reclassified to ‘discontinued operations’
Financial highlights
- Sales up by 19% at actual exchange rates and by 14% at constant exchange rates, driven by retail, up 22% at actual exchange rates (+17% at constant exchange rates), representing 68% of Group sales
- Sales growth across all regions, distribution channels and business areas, at actual and constant exchange rates
- Growth resumed in Asia Pacific with sales up 6% at actual rates (+1% at constant exchange rates); double-digit increases in all other regions at actual and constant exchange rates, led by Japan and Europe
- Double-digit sales increases across all distribution channels and business areas at actual exchange rates, and almost all business areas at constant exchange rates
- Operating profit, up 34% to € 5 billion, including non-recurring items of € 66 million net, leading to an increased operating margin of 25.2%:
- Jewellery Maisons generated 21% sales growth at actual exchange rates (+16% at constant rates) and 35% operating margin;
- Specialist Watchmakers grew sales by 13% at actual exchange rates (+8% at constant exchange rates) achieving a 19% operating margin;
- ‘Other’ business area (predominantly F&A Maisons) delivered strong sales growth (+19% at actual exchange rates, +13% at constant exchange rates) and a € 59 million operating profit (of which € 94 million for the F&A Maisons).
- 60% increase in profit for the year from continuing operations to € 3 911 million; € 3.6 billion loss from discontinued operations primarily resulting from the € 3.4 billion non-cash write-down of YNAP net assets
- Solid net cash position of € 6.5 billion
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Chairman’s commentary
Overview of results
Richemont reported excellent results for the financial year ended 31 March 2023, with all business areas generating higher sales and profits. The Group has drawn on the strength of its Maisons and the resilience of luxury consumers in an environment characterised by geopolitical volatility, economic uncertainty and high inflation.
During the year under review, sales attained an all-time high of
€ 20 billion, a 19% year-on-year increase. The final quarter recorded a significant sales increase as sales in Asia Pacific resumed growth following the removal of travel and health restrictions in mainland China. All the business areas, distribution channels and regions posted growth during the year. This performance was led by retail, Japan and Europe, closely followed by the Americas. Sales in directly-operated stores continued to outperform the other distribution channels markedly, their contribution to Group sales rising to 68%, and combined with online sales accounted for almost three quarters of Group sales. Both outcomes demonstrate the success of our ongoing client engagement strategy.All business areas delivered double-digit sales growth compared to the prior year. Our Jewellery Maisons, Buccellati, Cartier and Van Cleef & Arpels, increased their combined sales to € 13.4 billion and operating profit to € 4.7 billion, generating an improved 34.9% operating margin compared to the prior year. While Buccellati continued to develop solidly, generating the highest growth rates across the Group albeit from a smaller base, Cartier and Van Cleef & Arpels reaffirmed their market leadership with a high level of sales growth and profitability. The Jewellery Maisons enjoy the highest level of direct-to-client engagement within the Group (83%).
Our Specialist Watchmakers performed strongly with combined sales of € 3.9 billion and operating margin improving to 19.0% compared to the prior year. Over the past six years, the Specialist Watchmakers have undergone a profound evolution of their business model, which has successfully led to direct-to-client sales reaching 56% of sales this financial year while sales in branded environments neared three quarters of their sales. The Specialist Watchmakers are reaping the benefits of past strategic actions and clear leaders have emerged, notably Vacheron Constantin which has reached one billion euros in sales.
ADVERTISEMENTThe Group’s ‘Other’ business area, mostly composed of the Fashion & Accessories Maisons and now including Watchfinder, recorded sales of € 2.7 billion, up 19% compared to the prior year. Watchfinder’s muted performance was more than offset by sharp growth in sales and profitability at the Fashion & Accessories Maisons, driven by renewed creativity and higher travel retail footfall. Strong Maisons have emerged alongside Montblanc and Chloé, especially Peter Millar, including its G/FORE business, which generated sales in excess of € 0.6 billion. Overall, the business area returned to profit with the Fashion & Accessories Maisons delivering € 94 million in operating profit.
At Group level, operating profit reached an all-time high of € 5 billion and operating margin expanded further to 25.2%. The significant 34% growth in operating profit, combined with well-controlled working capital, led to a robust € 4.5 billion cash flow from operating activities. Profit for the year from continuing operations rose by 60% to € 3.9 billion. The overall profit for the year was limited to € 301 million due to the € 3.6 billion loss for the year from discontinued operations. This was primarily due to the € 3.4 billion non-cash charge on the transfer of YNAP net assets to ‘held for sale’.
Our Luxury New Retail (‘LNR’) partners
The agreement for FARFETCH and Alabbar to acquire 47.5% and 3.2% of YOOX NET-A-PORTER (YNAP), respectively, leaving Richemont with a 49.3% holding in YNAP with 12-13% of FARFETCH’s issued share capital, is subject to a number of conditions, including the receipt of certain antitrust approvals. The initial stage of the transaction is expected to complete by the end of calendar year 2023. From this point onwards, Richemont Maisons will adopt FARFETCH’s technology to realise their LNR vision to address clients’ needs in a seamless manner across distribution channels. YNAP will also adopt FARFETCH Platform Solutions to accelerate its shift towards a hybrid model and significantly enhance its prospects as a neutral industry-wide platform.
Dividend
Based upon the strong performance of the year, significant cash flow generation and a solid net cash position of € 6.5 billion at the end of March 2023, the Board proposes to pay an ordinary dividend of 2.50 Swiss francs per 1 A share (and CHF 0.25 per ‘B’ shares), up by 11% over the prior year as well as a special dividend of CHF 1.00 per ‘A’ share (and CHF 0.10 ‘B’ shares), subject to shareholders’ approval at the Annual General Meeting (‘AGM’) on 6 September 2023.
Annual General Meeting, Board changes and management appointments
At the Annual General Meeting in September 2022, two valued and experienced non-executive directors, Jan Rupert and Ruggero Magnoni, stepped down from the Board. I wish to reaffirm my warmest thanks to each of them for their invaluable service.
Also at the 2022 AGM, a resolution allowing for ‘A’ shareholder representation was voted on for the first time, at the request of a shareholder. Wendy Luhabe, nominated by the Board, was elected to this role by 84% of the ‘A’ shareholders who cast their votes. She was elected to the Board with 98% supportive votes. All non-executive directors were elected by an overwhelming majority of the ‘A’ shares cast. The voting at the meeting reflected a continued endorsement of the collegial board model, adopted at the time of foundation 35 years ago, where all directors serve the interest of all shareholders, ‘A’ and ‘B’ combined. I would like to once again express my deepest thanks to our long-term shareholders for their overwhelming support. We will continue executing on our Group strategy to create value for our shareholders, communities and colleagues, taking a long-term view.
At the 2023 AGM, shareholders will be asked to elect two new directors to the Board: Fiona Druckenmiller and Bram Schot. Ms Druckenmiller’s jewellery expertise, understanding of the American clientele and social and environmental causes will be of great value to the Board while Mr Schot brings more than three decades of experience in the premium automotive industry and a deep understanding of risk management, supply chain and sustainability issues. Their biographies may be found in the annual report.
After the 2023 AGM and subject to shareholders’ approval, the Board will temporarily increase to 18 members as we continue to execute on our succession plan for our long serving non-executive directors and ensure effective transmission of knowledge. Female Board members will represent 33% of the new Board. We will continue to address age, tenure, skills and geographic representation on the Board.
On 31 March 2024, the Board will bid farewell to two long-serving and valued Non-executive Directors, Guillaume Pictet and Jean-Blaise Eckert. Clay Brendish and Maria Ramos, two other respected Non-executive Directors, have also indicated that they will step down from the Board of Directors on 31 March 2025 after 14 and 13 years of service, respectively. I wish to thank them all for their invaluable and much appreciated contribution to the development of Richemont.
We have further strengthened our Senior Executive Committee (SEC) with the appointments of Patricia Gandji, the Group’s Chief People Officer and CEO of Regions, in November 2022 and Bérangère Ruchat, the Group’s Chief Sustainability Officer, in February 2023. These appointments reaffirm the importance of people, Environmental, Social and Governance (ESG) matters across the Group.
The tender process to select the next Group’s external auditor is progressing in a timely fashion to be completed in time for the 2025 AGM and our shareholders’ approval.
