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Unformatted text preview: 2016 REGISTRATION DOCUMENT Message from the Executive Management  Highlights for 2016 1 2 3 4 Overview of the Group AFR 1.1 Stages of the Group’s history 1.2 Key figures 1.3 Activity by sector 1.4 Activity by geographic area 1.5 Simplified Group organisational chart 1.6 Property 1.7 Fondation d’Entreprise 1.8 Risk factors Corporate social responsability AFR 2.1 Introduction 2.2 Savoir-faire 2.3 People 2.4 Raw materials and suppliers 2.5 Environment 2.6 Stakeholders and local integration 2.7 Report from one of the Statutory Auditors, designated as the independent third party organisation 5 5 6 9 10 13 15 23 29 32 159 Parent company financial statements 6.1 Statement of profit or loss for 2016 6.2 Statement of financial position as at 31 December 2016 AFR 6.3 Changes in equity in 2016 AFR 6.4 Statement of cash flows for 2016 AFR 6.5 Note to the financial statements AFR 6.6 List of investments in subsidiaries and associates as at 31 December 2016 6.7 Table of subsidiaries and associates as at 31 December 2016 AFR 6.8 Table of results over the last five financial years 6.9 Statutory auditors’ report on the annual financial statements AFR 213 160 161 162 164 166 168 210 32 33 6 37 38 41 44 56 63 81 85 Corporate governance AFR 89 3.1 Administrative, management, or supervisory bodies 90 3.2 Report from the Chairman of the Supervisory Board 110 3.3 Statutory Auditors’ report on the report from the Chairman of the Supervisory Board 137 3.4 Compensation and benefits paid to Corporate Officers 138 Comments on the financial year and outlook AFR 4.1 Summary consolidated financial statements 4.2 Comments on the consolidated results 4.3 Information on the parent company financial statements, on accounts payable due dates, subsidiaries and associates 4.4 Outlook Consolidated financial statements AFR 5.1 Consolidated statement of profit or loss for 2016 5.2 Consolidated statement of other comprehensive income 5.3 Consolidated statement of financial position as at 31 december 2016 5.4 Consolidated statement of changes in equity as at 31 december 2016 5.5 Consolidated statement of cash flows 5.6 Notes to the consolidated financial statements 5.7 Statutory Auditors’ report on the consolidated financial statements 7 149 Information on the Company and its share capital 7.1 Presentation of hermès international and Émile Hermès SARL 7.2 Information on share capital and shareholders AFR 7.3 Financial authorisations 7.4 Dividend policy 7.5 Stock-market information 7.6 Shareholder information 214 215 216 217 218 232 234 238 239 241 242 253 266 271 272 276 150 152 8 154 156 9 Combined General Meeting of 6 June 2017 8.1 Agenda 8.2 Purpose and draft resolutions 8.3 Supervisory Board’s report to the Combined General Meeting of 6 June 2017 8.4 Statutory Auditors’ reports 279 Additional information 9.1 Persons responsible for the registration document AFR 9.2 Statutory Auditors and their fees AFR 9.3 Regulatory Information consultation 9.4 Information incorporated by reference 9.5 Cross-reference table 317 The information in the annual financial report is identified in the contents with the help of the AFR pictogram. 280 282 305 306 318 319 320 321 322 In accordance with Article 212-13 of the AMF General Regulation, this Registration Document containing the annual financial report was with the Financial Markets Authority («AMF») on 19 April 2017. This document may be used in support of a financial transaction only if it is supplemented by a securities note approved by the Financial Markets Authority (AMF). This document has been drawn up by the issuer and implies the responsibility of its authorised signatories. 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL 1 2 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL 2016 REGISTRATION DOCUMENT Including the annual financial report 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL 3 4 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL Our true nature (or) Our values are alive Like good gardeners, we seek to cultivate our values. Loyalty to our spirit of work well done, the preservation of our know-how, and the importance we attach to its transmission are all factors that ensure our house is built on firm ground. Solidity is one thing; vitality is quite another, and just as important. While ancient palaces have their charm, our preference is for vibrant houses resounding with ideas, dialogue and laughter. Above all, we cultivate that which has thus far safeguarded our good health: the creativity of artists and the ingenuity of artisans. This desire to renew and reinvent ourselves is constant. It is etched into our most profound nature and is a fundamental value that determines our path. Finally, with a gardener’s spirit, we tend to this vitality while respecting the great equilibrium of the world, an issue that concerns and motivates us, and drives us to progress. As I am sure you are aware, since our house was founded in 1837, respect for nature has never ceased to be a guiding spirit! Axel Dumas Émile Hermès SARL EXECUTIVE REPRESENTED BY ITS EXECUTIVE CHAIRMAN CHAIRMAN, HENRI-LOUIS BAUER 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL 5 H I G H L I G H T S F OR 20 16 H I G HL I G H T S F OR 2 0 1 6 GENERAL TREND Excellent performance in sales and results in 2016 Revenue by sector at the end of december The Group’s consolidated revenues passed the €5 billion mark to reach €5,202 million up 7.5% at current exchange rates, and 7.4% at constant exchange rates. Recurring operating income, up 10%, amounted to €1,697 million (32.6% of sales) and net profit increased 13% to reach €1,100 million. Growth over the year was driven by the success of Leather Goods and Saddlery products which confirm their role as the mainstay of the Group. Otherwise, sales benefitted from a positive momentum at year end in certain sectors such as Silk and the Ready-to-wear and Accessories division. Sales by geographical area and by business line (At constant exchange rates unless otherwise indicated) The solid rise in revenue recorded in 2016 in Group stores (+8%) was driven by growth in all geographic areas. Hermès continued to improve the quality of its distribution network, with four store openings and several renovations and extension works. All geographic areas progressed in 2016 Japan (+9%) performed well thanks to its selective distribution network, despite the strengthening of the Yen and a high comparison basis. Asia excluding Japan (+7%) pursued its growth, particularly with extensions of the Liat Towers and Takashimaya stores in Singapore and store openings in Macao, at Hong Kong Airport and in Chongqing in China. In mainland China, the Group continued to develop even though the context remains challenging in Hong Kong and Macao. America (+7%) achieved solid growth, in a contrasting environment. The stores in Hawaii and Philadelphia were renovated and extended at the end of the year. Europe (+8%) posted growth, performing well which confirms the resistance of the Group, despite the impact of recent events. After being extended and renovated in October, the Bocca di Leone store in Rome is experiencing a great success. France (+5%) displayed solid growth. 6 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL Growth in Leather Goods and Saddlery (+14%) was remarkable, thanks to the success of the collections and the diversity of models, particularly the Constance, Halzan and Lindy bags alongside the Birkin and Kelly. Development was supported by the sustained pace of deliveries and production, gaining from the capacities of the three new sites in Charente, Isère and Franche-Comté. Investments for a third site in this latter region continued. The Ready-to-wear and Accessories division was stable over the year and posted a 4% increase in the 4th quarter, driven by the success of the latest women’s ready-to-wear and fashion accessories collections, particularly shoes. The Silk and Textiles business line (-1%) performed well in the 4th quarter, after being penalised by events in Europe and by slowing sales in Greater China during the first half of the year. Perfumes (+9%) posted growth, driven by the success of Terre d’Hermès, the launch of Galop d’Hermès, and the latest creations such as the Colognes, Eau de néroli doré and Eau de rhubarbe écarlate. The Watches business line (-3%) was penalised by a still challenging market and a high comparison basis at year end. Other Hermès business lines (+2%), which encompass Jewellery, Art of Living and Hermès Table Arts, continued their development. HIGHLIGHTS FOR 2 01 6 Operating margin reached an all-time high of 32.6% of sales Recurring operating income rose 10% to reach €1,697 million compared to €1,541 million in 2015. Operating margin (32.6% of sales) improved by 0.8 points compared to 2015, particularly due to the favourable impact of foreign exchange hedges. Growth in workforce The Hermès Group’s workforce gained 590 members, including more than 400 in France, mainly in the production facilities and sales teams. At year-end 2016, the Group employed 12,834 people including 7,881 in France. Consolidated net profit (Group share) increased 13% to €1,100 million, representing 21.2% of sales. Cash flow from operating activities reached €1,439 million, up by 18%. It enabled the Group to finance all capital expenditure (€262 million) and the distribution of the ordinary dividend (€350 million). After accounting for the decrease in working capital requirements, net cash rose by c. €750 million and amounted to €2,320 million as at 31 December 2016. In 2016, Hermès International redeemed 319,621 shares for €110 million, outside transactions completed within the framework of the liquidity contract. 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL 7 1 OVERVIEW OF THE GROUP STAGES OF THE GROUP’S HISTORY 10 Six generations of craftsmen 10 1.2 KEY FIGURES 13 1.1 1.2.1 Breakdown of revenue by sector 2016 vs 2015 13 1.2.2 Breakdown of revenue by geographical area 2016 vs 2015 13 1.2.3 Key consolidated data 13 1.2.4 Changes in consolidated revenue 14 1.2.5 Change in recurring operating income 14 1.2.6 Change in the number of exclusive retail stores 14 1.2.7 Investments (excluding financial investments) and operating cash flows 14 1.3 ACTIVITY BY SECTOR 15 1.3.1 Leather Goods and Saddlery 15 1.3.2 Ready-to-wear and Accessories 16 1.3.3 Accessories 17 1.3.4 Silk and Textiles 18 1.3.5 Other Hermès sectors 18 1.3.6 Perfumes 19 1.3.7 Watches 19 1.3.8 Other products and brands 20 1.3.9 Partnerships 22 1.4 ACTIVITY BY GEOGRAPHIC AREA 23 1.4.1 Europe 23 1.4.2 Americas 23 1.4.3 Asia-Pacific 24 1.4.4 Hermès points of sale worldwide 25 1.5 SIMPLIFIED GROUP ORGANISATIONAL CHART 29 1.5.1 Overview description of the Group as at 31 December 2016 29 1.5.2 Production facilities 30 1.6 PROPERTY 32 1.7 FONDATION D’ENTREPRISE 32 1.8 RISK FACTORS 33 1.8.1 Risks linked to the operational strategy 33 1.8.2 Financial risks 34 1.8.3 Insurance policy 35 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL 9 1 O V E R V I E W OF TH E GR OUP STAGES OF THE GROUP’S HISTORY 1.1 STAGES OF THE GROUP’S HISTORY SIX GENERATIONS OF CRAFTSMEN Today, Hermès employs 12,834 people worldwide and has 307 exclusive stores, 210 of which are directly operated. Although it has achieved international stature, Hermès has never lost its human touch and continues its tradition of fine craftsmanship. Thierry Hermès, a harness-maker, set up business in Paris in 1837. Ever since, his descendants have worked together to develop the Hermès Group. In 1880, his son transferred the family business to its now-famous address, 24 Faubourg Saint-Honoré, where he expanded into saddlery. Soon, he was supplying saddles and harnesses to the stables of aristocrats all over the world. In 1918, with the advent of the automobile, the founder’s grandson, Émile Hermès, foresaw the coming changes in transportation and envisioned new lifestyles. He launched a line of fine leather “saddlestitched” goods and luggage. The Hermès style was born, and its field of activity has never ceased to grow. Émile Hermès also accumulated a private collection of paintings, books and articles that were to be a source of inspiration for designers. During the 1950s, Émile Hermès’ sons-in-law, Robert Dumas and Jean-René Guerrand, continued to diversify operations whilst safeguarding the brand’s integrity, creating clothing, jewellery, watches, diaries, silk scarves and more… Starting in 1978, with the help of other fifth- and sixth-generation members of the family, Jean-Louis Dumas brought renewed impetus to Hermès by expanding into new sectors and establishing a global network of Hermès stores. 28 years later, in 2006, he entrusted the management to Patrick Thomas and the company Émile Hermès SARL, while the artistic directorship was passed on to Pierre-Alexis Dumas in February 2009. Axel Dumas, a sixth-generation family member, was appointed Executive Chairman in 2013 alongside Patrick Thomas, who subsequently left his post in January 2014. Axel Dumas is now in sole charge of the house. Today, Hermès applies its creativity to a wide range of sectors: leather goods and saddlery, men’s and women’s ready-to-wear, footwear, belts, gloves, hats, silks and textiles, jewellery, furniture, furnishing fabrics, wallpaper, tableware, perfumes, watches and petit h. International in scope, Hermès is characterised by superlative manufacturing inspired by the values of traditional craftsmanship, and remains a family firm with a uniquely creative spirit that is continuously renewed. For almost 180 years, Hermès has been creating, inventing and innovating. Some of our models enjoy enduring success decades after they were first designed. Reissued, reinterpreted and reinvented, these timeless creations forge the identity of Hermès. 10 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL 1837 s Harnesses 1867 s Saddles Around 1900 s Haut à courroies bag, designed by Émile Hermès 1903 s Rocabar blanket 1922 s Belts 1923 s Two-handled bag 1924 s Gloves with zipper Starting in 1925 s First sports jacket, followed by the development of women’s and men’s fashions s Mallette à coins rapportés 1927 s Wristwatches s Filet de selle bracelet 1928 s Ermeto watch s Sac à dépêches 1930 s Diaries 1937 s First silk scarves 1938 s Chaîne d’ancre bracelet, designed by Robert Dumas s First garments with silk scarf patterns OVE RVIE W OF THE G RO UP STAGES OF THE GROUP’S HISTORY 1949 1984 s Printed silk ties s Belt and bracelet s Collier de chien s Pivoines porcelain tableware s Birkin bag, created by Jean-Louis Dumas 1 1985 1951 s Gavroche scarves in silk twill s Eau d’Hermès fragrance 1986 1954 s Beach towels in printed terry towelling s Bel Ami fragrance for men s Toucans porcelain tableware s Pippa furniture 1956 s The bag designed by Robert Dumas in the 1930s is officially named Kelly 1991 s Cape Cod watch s Nantucket watch 1961 s Twillaine: garments in knit and silk twill s Calèche fragrance for women 1993 s Oxer saddle s Médor watch 1967 s Constance bag 1970 s Équipage fragrance for men 1971 s Nausicaa bracelet 1972 s First Hermès shoes for women 1974 s Amazone fragrance for women 1995 s 24 Faubourg fragrance for women s Fourre-tout bag 1996 s Harnais watch s Heure H watch 1997 s First Hermès shoes for men s Oran sandal 1998 1975 s Herbag bag s Twice-round leather watchstraps s Quick trainers s Passe-Guide bag s Kelly watch s John Lobb shoes 1999 1978 s First complete men’s ready-to-wear collection s Highland ghillie shoes s Enamel bracelets 1979 s Eau de Cologne Hermès, renamed Eau d’orange verte in 1997 s Pleated scarves 1981 s Hiris fragrance for women 2000 s s s s Corlandus dressage saddle Tandem watch Nil porcelain tableware Rouge Hermès fragrance for women 2002 s Picotin bag s Plein cuir desk line, a reissue of a range originally created in the 1930s s Quark ring s Clipper watch 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL 11 1 O V E R V I E W OF TH E GR OUP STAGES OF THE GROUP’S HISTORY 2003 s s s s s Un Jardin en Méditerranée fragrance Twilly in silk twill Dressage Automatic gold watch Étrivière briefcase 2004 s s s s Eau des Merveilles fragrance for women Brasilia jumping saddle Hermessence First fragrance collection 2005 s Un Jardin sur le Nil fragrance s Porcelain tableware s Balcon du Guadalquivir porcelain tableware 2011 s s s s s Bleus d’Ailleurs porcelain tableware Berline bag Un Jardin sur le Toit fragrance Arceau Le Temps Suspendu watch First collection of furnishing fabrics and wallpapers 2012 s Jour d’Hermès fragrance for women s 8 cm ties in heavy silk twill 2013 s s s s s s Hermès Cavale saddle Maxibox bag Le Flâneur d’Hermès bicycle Rallye 24 porcelain tableware Les Nécessaires d’Hermès Occasional furniture 2006 s Terre d’Hermès fragrance for men s Porcelain tableware s Cheval d’Orient 2007 s s s s s Lindy bag 70 scarves in vintage silk Kelly Calèche fragrance for women Fil d’argent porcelain tableware Jewellery in rose gold and brown diamonds 2008 s s s s Jypsière bag Horizon diary First Hermès Éditeur scarf Un Jardin après la Mousson fragrance 2009 s s s s s s Victoria saddle Dip-dye scarves Colognes Hermès Porcelain tableware Mosaïque au 24 Cape Cod Tonneau watch 2010 s s s s s s s 12 First haute bijouterie collection Les Maisons enchantées faience tableware Talaris saddle Voyage d’Hermès fragrance Reissue of furniture Jean-Michel Frank furniture reissued by Hermès Toolbox bag 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL 2014 s s s s s s s Oxer bag Nautilus pen Faubourg watch Third haute bijouterie collection Le Parfum de la maison H-Déco tea and dessert service Lighting collection 2015 s s s s s s s Octogone bag Cherche-Midi bag Slim d’Hermès watch Le Jardin de Monsieur Li fragrance Porcelain tableware Voyage en Ikat Cityhall briefcase 2016 s s s s s s Verrou bag Bâton de Craie bag Hermès Arpège dressage saddle Carnets d’Équateur porcelain tableware Galop d’Hermès fragrance for women Fourth HBIV Continuum haute bijouterie collection OVE RVIE W OF THE G RO UP KEY FIGURES 1.2 KEY FIGURES 1.2.1 BREAKDOWN OF REVENUE BY SECTOR 2016 VS 2015 1 BREAKDOWN OF REVENUE BY GEOGRAPHICAL AREA 2016 VS 2015 1.2.2 Watches Other products 3% (3%) 4% (4%) Perfumes Others France 2% (2%) 14% (14%) Americas 5% (5%) Leather Goods and Saddlery Other Hermès sectors 18% (18%) 50% (47%) 7% (7%) Europe (excluding France) 18% (19%) Silk and Textiles 10% (11%) Asia-Pacific (excluding Japan) Ready-to-wear and Accessories Japan 14% (12%) 34% (35%) 21% (23%) 1.2.3 KEY CONSOLIDATED DATA 2016 2015 2014 Revenue 5,202.2 4,841.0 4,118.6 3,754.8 3,484.1 Operating income 1,696.5 1,540.7 1,299.3 1,218.0 1,118.6 In millions of euros 2013 2012 Net income attributable to owners of the parent 1,100.3 972.6 858.8 790.3 739.9 Operating cash flows 1,438.7 1,218.2 1,048.7 1,015.9 884.8 Investments (excluding financial investments) Equity attributable to owners of the parent 1 285.4 266.6 322.2 232.4 370.0 4,382.6 3,742.0 3,449.0 2,825.6 2,344.4 Net cash position 2,319.8 1,571.2 1,421.6 1,022.0 686.1 Restated net cash 2 2,345.3 1,614.0 1,493.6 1,091.0 721.0 948.9 792.7 712.6 655.1 605.7 Economic value added (EVA) 3 4 Return on capital employed (ROCE) Number of employees (1) (2) (3) (4) 49% 45% 43% 45% 49% 12,834 12,244 11,718 11,037 10,118 Equity excluding non-controlling interests. Net cash includes non-liquid financial investments and borrowings. Difference between recurring operating income after tax on operating income and the weighted average cost of capital employed. Recurring operating income, after tax on operating income, based on average capital employed. 2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL 13 1 O V E R V I E W OF TH E GR OUP KEY FIGURES CHANGES IN CONSOLIDATED REVENUE 1.2.4 1.2.6 In millions of euros CHANGE IN THE NUMBER OF EXCLUSIVE RETAIL STORES Concessionaires Branches 5,202 4,841 4,119 3,484 3,755 118 112 104 97 97 205 203 207 210 210 2,841 2,401 1,625 1,765 2007 2008 1...
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