News The Geneva based luxury products group Richemont posted increases in operating profit and net profit of 21% and 18% respectively in 2007-2008. In addition, it is envisaging a two-way split and is launching a share buyback programme.
The 2007-2008 financial year of the Compagnie financière Richemont which ended on 31 March is fully in line with the excellent results of the sector for this period. The group’s operating and net profit increased respectively by 21% and 18%, to 1,108 and 1,570 million euros, on turnover unveiled at the end of April of 5.3 billion euros, an increase of 10% (+16% at constant exchange rates). With regard to net profit, the share of the parent company and its subsidiaries was 960 million (+22%) while the holding in British American Tobacco (BAT) generated 610 million (+13%).
Profitability was driven mainly by watch companies (Jaeger-LeCoultre, Piaget, IWC, Baume & Mercier, Vacheron Constantin, Officine Panerai and A. Lange & Söhne) which recorded an operating profit of 376 million euros (+37% compared to the 2006-2007 financial year) on turnover up by 15% to 1,378 million. The jewellery sector (Cartier and Van Cleef & Arpels) for its part saw its operating profit rise to 767 million (+15%) on sales up by 9% to 2,657 million, while specialists in writing instruments (Montblanc and Montegrappa) posted a profit of 120 million (+9%) on turnover of 637 million (+9%). Lastly, operating “profit” of the problematic leather and accessories division (Dunhill and Lancel) improved while remaining negative, at -3 million compared to -11 million in 2006-2007, on sales up by a small percentage to 309 million.
With regard to the future, Richemont says it is cautiously optimistic. According to the official statement released on 22 May, although the current crisis is worrying, the group feels it is well placed having closely examined the situation of all of its companies on all markets. In April, the first month of the 2008-2009 financial year, it recorded solid growth, with an increase in sales of 16% in euros and 24% at constant exchange rates.
Towards a demerger
The Compagnie financière Richemont SA is planning to split in two. The first company will concentrate on luxury products and will be based in Switzerland. The second will take the form of an investment fund, with its headquarters in Luxembourg, and will focus largely on the holding in tobacco manufacturer British American Tobacco (BAT).
Shareholders will receive shares in both companies. Those of the company present on the luxury market will be listed on the Swiss Bourse. The others will be listed on the Luxembourg Bourse. Investors will also have the possibility of receiving an important quota of their holding directly in BAT shares.
To date, not all conditions necessary for the demerger are in place, nor have all authorisations been obtained. Implementation of this plan is not therefore guaranteed at the present time.
Share buyback programme
Richemont is going to launch a share buyback programme which will run over two years. During this period, the group will buy back up to 10 million of its own shares on the market. This represents 1.74% of shares in circulation and 0.96% of voting rights.
The shares bought will not be destroyed, but will be used for option plans for managers. The group will buy back its stock from the SWX Swiss Bourse and the Johannesburg Bourse at market prices. No second trading line will be established.
At present Richemont holds 13.1 million of its own shares ("A-Units"), corresponding to 2.29% of the capital. The company also has call options for the acquisition of 8.9 million additional shares (1.55% of the capital).
May 30, 2008
