– Sales decreased by 4% at both actual and constant rates to € 10 647 million. Excluding the impact of previously announced exceptional inventory buy-backs, sales declined by 2% at constant rates.
– Sales of jewellery, leather goods and writing instruments increased.
– Growth was strong in mainland China, Korea and in the UK; the USA returned to growth.
– Operating profit decreased by 14%.
– Net cash position increased by € 452 m to € 5.8 billion.
– Proposed dividend of CHF 1.80 per share, an increase of 6 %.
Overview of results
The past year posed challenges for Richemont. The Group responded to changes in demand, which particularly affected our watch businesses, and shifting patterns of consumption. The Group has addressed those challenges by taking significant measures which, while having weighed on short term financial performance, will ensure Richemont is well positioned for the future.
In the year under review, Richemont reported a limited decrease in sales reflecting growth in retail sales offset by a decline in wholesale sales. The second half of the year saw an improvement overall. The USA, Richemont’s largest country, resumed growth while Mainland China, now the Group’s second largest country, enjoyed strong growth along with Korea, the United Kingdom and Macau. Excluding exceptional initiatives to improve inventory at our multi-brand retail partners and to optimise certain retail and wholesale locations, the decline in sales would have been contained to 2% at constant exchange rates. Growth in jewellery, leather goods and writing instruments partly mitigated weak wholesale sales which were largely affected by the above mentioned initiatives. Cartier watches, within the Jewellery Maisons, and the Specialist Watchmakers were impacted by exceptional buybacks and capacity adjustment measures. Montblanc, Chloé and Peter Millar reported good progress.
Our Maisons have continued to adjust their fixed cost bases and manufacturing structures to a sustainable level of demand. Accordingly, significant one-time charges were recorded in operating profit, which decreased by 14%.
Profit for the year was well below the prior year’s level. Excluding the one-time gain on the merger of the NET-A-PORTER and YOOX Groups in the prior year, profit for the year would have decreased by 24%. Good working capital management limited the decline in cash flow from operations whilst cost control and the disposal of investment properties contributed to an increase in net cash to € 5.8 billion at 31 March 2017.
Based upon the cash flow generation and the increase in net cash, the Board has proposed a dividend of CHF 1.80 per share; up from CHF 1.70 per share last year.
As announced in November 2016, we are in a period of senior management change. My valued colleague, Mr Richard Lepeu, retired from his position as Chief Executive Officer on 31 March this year. He has played an invaluable role over the past 38 years in building Richemont to its current size and strength through his involvement with Cartier for the first 22 years, and at Group level for the last 16 years. I am pleased to say that Richard will be advising me on Group and Maison developments going forward.
I should also like to thank Mr Gary Saage for his contribution to ensuring financial discipline across the Group in his capacity as Chief Financial Officer. Richemont’s strong cash position is due in no small measure to Gary’s strict management of working capital – something that I know his successor will continue to pay close attention to. Gary returns to the US and hands over his position at the end of July this year. However, he will remain as a non-executive director on the Board.
Richemont’s new senior management team comprises Mr Georges Kern, who is responsible for our watchmaking businesses, digital and marketing and Mr Jérôme Lambert, who has responsibility for the Richemont regional platforms and services and for our other businesses other than Cartier, Van Cleef & Arpels and the specialist watchmakers. They both took up their new roles formally at the beginning of April, having benefited from a handover period with Richard. Mr Cyrille Vigneron continues to oversee Cartier and Mr Nicolas Bos Van Cleef & Arpels. Mr Burkhart Grund took on the role of Deputy Group CFO last year and will take over from Gary with effect from 1 August this year.
Richemont has a strong cash flow and a strong balance sheet that enables us to focus on value creation for shareholders over an extended time horizon.
Volatility and uncertainty in the geopolitical and trading environments are likely to prevail. Our attention is focused on transitioning the Group to adjust to operating in a more sustainable growth environment, by adapting our product offer, communication and distribution to new consumption patterns while allocating resources primarily towards research and innovation, digital marketing, online sales platforms and training in all of our Maisons.
Richemont has a strong cash flow and a strong balance sheet that enables us to focus on value creation for shareholders over an extended time horizon. This approach allows our Maisons, which have significant brand equity and heritage, to plan and grow in what we continue to believe is a unique business with excellent long-term prospects.