Swiss-based, South Africa-listed luxury goods group Richemont has outperformed market expectations for its financial year ending March 31 2004, analysts said on Thursday, reporting a 3% rise in fully diluted earnings per unit of €1,193 and boosting its dividend by 25% to €0,4 per unit.
The group’s earnings from its luxury retail brands beat forecasts at €238-million, compared with a consensus of about €200-million, thanks to a strong pick-up in sales in the final quarter of the year. Analysts had expected earnings of about €1,05 per unit.
Despite the better-than-expected results, Richemont’s share price fell marginally in early trade, last quoted at R17,65, down two cents or 0,11% from R17,67 at Wednesday’s close, with 515 277 shares having changed hands in 82 trades so far.
Richemont owns such well-known luxury brands as Cartier, Dunhill, Lancel, Van Cleef & Arpels, Jaeger LeCoultre and Montblanc. One of its principal sources of income is its 18,6% effective stake in British American Tobacco (BAT), which fell from 19,6% in 2003 due to the exercise of call warrants over BAT preference shares during the year.
The group’s move to increase its dividend by 25% was seen as a relatively bullish one, with executive chairperson Johann Rupert noting that it had been done as a reflection of Richemont’s confidence in the future — in line with its healthy cash position and the improvement seen in trading conditions in recent months.
The group is now in a net cash position following the cash inflow from the proceeds of the BAT preference shares, combined with strong cash generation from its luxury goods businesses and the dividend flow from BAT.
The group’s equity-accounted share of the profits of BAT fell 13% to €422-million for the year, largely due to a change in accounting treatment. Excluding BAT, its operations generated €349-million in free cash, and earnings from its luxury brands totalled €238-million.
In line with its pledge to reduce costs, Richemont was able to cut its operating expenses by 11% over the year, which it allowed to increase its operating profit by 14% to €296-million in the face of an 8% drop in total sales to €3,375-billion.
The group said that, despite a difficult first six months, due partly to the impact of severe acute respiratory syndrome in the Asia-Pacific market and depressed economic conditions in Europe, sales in constant currency terms for the year as a whole were in line with the previous year.
Sales had picked up considerably towards the end of the financial year, having grown by 10% in constant currency terms in the January-March 2004 quarter on the back of improved results in the United States and the Asia-Pacific region, and some signs of recovery in Europe.
Rupert also noted that Richemont saw strong demand growth in April and May 2004, with increases in sales at actual exchange rates of 23% and 21%, respectively. — I-Net Bridge