JOHANNESBURG - SWISS luxury group Richemont said on Friday that it had taken advantage of a low interest rate environment to raise long-term debt to fund the development of its businesses as it continued to adapt and evolve by completing a 4billion(R60bn) bond issue in March.
Chairperson Johann Rupert said following the 4bn bond issue completed in March, shareholders’ equity represented 57percent of total equity and liabilities, compared with 77percent in the prior year.
“The support received from investors for Richemont’s 4bn inaugural bond issue demonstrates the strength of our balance sheet and confidence in the quality of our assets and long-term growth opportunities,” Rupert said.
For the year to end March, the group currently has a strong net cash position which amounts to 5.27bn, down from 5.80bn. It said most of the decrease as compared to last year can be attributed to an investment in Dufry, a Swiss leading travel retail specialist, the acquisition of investment properties as well as the internalisation of wholesale activity and external points of sales in Saudi Arabia and the United Arab Emirates.
The group’s net cash position includes highly liquid, highly rated money market funds, short-term bank deposits and short-duration bond funds, primarily denominated in Swiss francs, euros and US dollars.
Richemont said the bank loans to finance local operating entities were denominated in their local currency. In the results, Richemont reported a 5percent increase in operating profit to 1.84bn, while sales increased by 3percent at actual exchange rates, driven by high single digit growth in retail and double digit growth in Asia Pacific, with particular strength in its main markets, namely China, Hong Kong, Korea and Macau. Strong overall retail performance reflected solid jewellery and watch sales.
Profit for the year was broadly in line with the prior year, up by 1percent to 1.22bn. Cash flow from operations improved to 2.72bn. Following the acquisition of investment properties and a stake in travel retail specialist Dufry, net cash totalled 5.3bn at the end of March.
The group said while Richemont’s unique portfolio of Maisons and other assets are well-positioned, its long-term approach does not preclude them from targeting strategic investments and divestments, as they have demonstrated over the past year. It added that its strong cash flow and balance sheet ensured that it was equipped to realise its full potential over the next 30 years.
In Jewellery Maisons, jewellery continued to perform strongly while watches benefited from easier comparatives and the successful relaunch of the "Panthère" line, introducing one of Cartier’s most iconic creations to a new generation.
The Specialist Watchmakers continued to focus on optimising their distribution network and adapting their structures accordingly. "Our approach to the grey market remains uncompromising."
The group said it implemented inventory buy-backs and strengthened the approach to managing sell-in versus sell-out at its multi-brand retail partners.