Luxury goods group Richemont sales up.

19 october 2004

Article by BusinessDay Richemont sales up 14% Luxury goods group Richemont (RCH) on Thursday reported a 14% increase in sales to euro 1.739 billion for the six months ended September 30 from 1.526 billion for the same period a year ago. The group's operating profit was 157% higher at euro 208 million, while net profit was up 42% to 411 million. Earnings per unit on a fully diluted basis were up 42% to euro 0.743 from euro 0.524. Richemont said it enjoyed a significant improvement in demand during the six-month period. Growth in sales of 22% in April and May 2004 more than offset the sharp decline seen in 2003 as a consequence of the Sars epidemic. This growth was complemented by growth of some 10% in sales in the latter part of the period and for the six month period overall, sales grew by 14% at actual exchange rates. Operating profit increased to euro 208 million, reflecting the growth in sales and improved margins resulting from higher manufacturing capacity utilisation and the close monitoring of operating expenses. Cash flow from operations amounted to euro 105 million. In addition, the group received euro 1.1 billion in respect of its investment in British American Tobacco (BAT) by way of dividends and the proceeds from the disposal of its interest in BAT preference shares. Consequently, net cash at the end of September amounted to EUR 203 million compared to net debt at 31 March 2004 of euro 794 million. The group's share of the results of BAT amounted to euro 238 million - an increase of 8% - primarily reflecting underlying profit growth and the strength of sterling against the euro, which more than compensated for the group's lower effective interest in the company during the period. Richemont Executive Chairman Johann Rupert said the improvement in results reflected a significant recovery in demand in those markets which showed the biggest downturn last year, specifically the Asia-Pacific region. There was also good growth in the Americas and in Europe. Cartier, the Group's leading Maison, had good momentum in terms of new products. New product launches during the period and a broader product offering have resulted in both higher sales and profitability. Richemont's specialist watch brands have also performed well. In particular, the three businesses acquired in 2000 - IWC, Jaeger-LeCoultre and A. Lange & Sohne - are now making significant progress in important markets where they were previously under-represented, he said. Montblanc's strategy of product diversification, linked to the expansion of its retail activity, continued to deliver good growth in sales and profitability during the period, he said. At Alfred Dunhill, the focus on leather, accessory and gift lines is bearing fruit, as is the expansion of the wholesale business. Operating losses have therefore been reduced. During the period, sales in the Asia-Pacific region, which is important to the Maison, recovered and Alfred Dunhill is building its distribution network in China. Lancel is still in a process of transition. Whilst the international retail network has been scaled back, wholesale distribution outside France has been expanded and Lancel will work with retail partners in China, the United States and Japan to grow its businesses in these markets. "We have seen a good performance from the Group's investment in British American Tobacco and Richemont is now debt-free, having received the proceeds of the disposal of its interest in the BAT preference shares," he said. Looking ahead, Rupert said the trend of growing sales has continued into the month of October, with overall growth of 8% for the month. Europe and the Asia-Pacific region reported good results, although growth in the United States slowed somewhat. "Richemont's Maisons are, in general, very strongly positioned in their respective markets. "They are better prepared than ever before to meet competitive challenges, can respond more flexibly and have outstanding products. "Equally, Richemont now has a very strong balance sheet and good cash generation," he said. Assuming a continuation of the trends seen in recent months, Richemont believes it should enjoy a strong pre-Christmas season, albeit recognising that comparative figures for the quarter to 31 December 2003 already showed an improving trend in sales. "Acknowledging that the Group's performance in the previous financial year was disappointing, we anticipate a significant improvement in operating profit for the current year," he said. "Nonetheless, we live in very difficult and volatile times and these expectations are, of course, predicated upon there being no events which might adversely impact consumer confidence in the months ahead," he concluded. I-Net Bridge Article by BusinessDay

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