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“It is my vision to shape Richemont into a simplified, streamlined holding company built on potent, independent and vertically organised operating businesses with strong support services provided by the Group.” |
| Norbert Platt, Group Chief Executive Officer |
We have achieved outstanding results during the year under review. Whilst it is fair to say that these results reflect the good economic environment, we should not lose sight of the fact that our businesses operate in highly competitive markets. Our competitors in the various sectors in which Richemont companies operate are also highly motivated and are very active in the marketplace. It is a tribute to the management of our Maisons that they have been able to grow the businesses so successfully during this period.
It is my vision to shape Richemont into a simplified, streamlined holding company built on potent, independent and vertically organised operating businesses with strong support services provided by the Group.
We must create the ‘Small Company Feeling’ in which creativity and clear responsibility can blossom; both are key to success through product development, manufacturing and marketing. Management within the Maisons must realise, however, that this independence, the responsibility for their own bottom line and the freedom that this entails must be earned.
It is with this in mind that we introduced last year documented key performance indicators (‘KPIs’) for the Maisons and for regional management, which provide services to them. The KPIs avoid ‘soft’ commitments and allow us to manage the companies based on clearly defined goals and to reward executives according to clearly established targets.
In order for the Maisons to concentrate on what they do best – product development, manufacturing and global sales and marketing – the Richemont organisation is primarily responsible for providing efficient and transparent multi-brand services within a global distribution infrastructure.
From the Group’s central IT perspective, we are building on the experience of Montblanc and extending the use of Enterprise Resource Planning (‘ERP’) software across the Group with the first, large-scale roll-out taking place later this year in the United States. The new ERP software will subsequently be introduced in our central distribution centre in Fribourg, Switzerland by the middle of next year.
This initiative is inevitably the start of a lengthy and intense process, which will stretch the organisation. However, once this system is in place globally, we will have significantly improved and standardised business processes across brands giving us faster access to data, thus enabling us to improve considerably our overall supply chain management.
Standardised processes will also enhance the efficiency of our product distribution and improve response time for customers throughout all our regional after sales service centres – two of the prime responsibilities of the crossbrand regional platforms.
There are opportunities to further improve these regional activities and to optimise their performance. However, we have already taken steps to simplify management structures, making sales teams directly accountable to their respective brand headquarters and giving local managers greater accountability for the running of the regional shared service centres.
In addition to the regional structure, Richemont also provides a central organisation under which the Maisons can operate independently of one another whilst benefiting from the financial strength and infrastructure of the combined Group. Central support services include intellectual property management, a vital element in protection of the Group’s brands, marketing support in terms of research and marketing intelligence, general legal services, Group-wide real estate planning and coordination, manufacturing and production-related services, Group human resources functions and central finance services.
Richemont has a portfolio of leading brands in its key business sectors. Cartier is recognised as the world’s premier jeweller and it is the cornerstone of our luxury goods business. Cartier is complemented by Van Cleef & Arpels which, although considerably smaller, is recognised as a leader in its chosen niche at the very top of the global jewellery market. Both houses performed extremely well during the year, with their combined sales increasing by 15 per cent. Whilst Van Cleef & Arpels will celebrate its centenary in 2006, Cartier saw the reincarnation during 2005 of its historical home at 13 rue de la Paix in Paris. You will find further information on the renovation in the Cartier section of this report on page 14.
The Specialist Watchmakers in the Group have an excellent year behind them, sales having grown by 22 per cent to € 1 063 million. Richemont’s distribution infrastructure has facilitated the growth of the watch businesses, especially for those brands which historically had focused principally on European markets. IWC and Jaeger-LeCoultre in particular have benefited increasingly over recent years from the opening up of new markets, largely in the United States and in Asia. However, all of the Maisons reported double-digit growth during the year – a testimony to the appeal of their products. Vacheron Constantin benefited from the success of its 250th anniversary celebrations, which featured special limited edition models.
Montegrappa complements Montblanc in the ‘Writing Instrument Maisons’ segment, where sales for the year under review increased by 17 per cent to € 497 million.
Montblanc is the world’s leading company in the field of prestige writing instruments and has developed its product ranges to include watches and leather goods. 2006 also sees the centenary of Montblanc, which is being celebrated around the world. A highlight of the centenary is the ‘Montblanc Diamond’. Specially created for Montblanc, the diamond has 43 facets cut in the form of the Montblanc signet; it will crown all of the special centenary editions.
In recent years, our Leather and Accessories Maisons – Alfred Dunhill and Lancel – have been disappointing. Mistakes were made but are now being rectified. The Chairman is closely involved with Alfred Dunhill and, in his review, has given his personal insight on the steps being taken to bring Alfred Dunhill back to profitability.
For Lancel, we have seen a considerable improvement in performance over the last twelve months and expect to see a return to profitability for this Maison during the current financial year. Lancel has invested in flagship stores in Paris and product lines have been significantly improved; this is reflected in the good sales performance seen during the year. We have also strengthened the management team, placing emphasis on enhancing the Maison’s capabilities in terms of design and styling, supply chain management and marketing and communications.
The principal elements of the ‘Other businesses’ segment today are Chloé and Purdey, together with smaller businesses and watch component manufacturing activities for third parties. During the year, we sold Hackett and the Group’s interest in Old England. If we exclude turnover from these two businesses, sales for the ongoing businesses increased by 73 per cent. This is largely attributable to the excellent performance of Chloé, which built on the appeal of its ready-to-wear clothing lines to launch handbags and other leather goods lines. The potential of Chloé encouraged us to invest in developing its retail distribution and communications programme over the last two years, which has yielded superb results.
To maintain a world class organisation, we will encourage a greater exchange of views and more vigorous debate between the centre, regional teams and brand management. Our management teams within the Maisons must continue to innovate and foster creative talent to deliver products that seduce our customers. In addition, our support services must be best in class – be it in terms of legal advice, supply chain management, customer services or IT. Intrinsically, that also means that those services must be provided on an economic and marketrelated basis, at competitive cost.
As Mr Rupert has often said, we manage the Group with a view to developing the underlying businesses over the long term. There is no place for a short-term mindset within Richemont; we invest in individuals, in businesses and in infrastructure for the long term, not for tomorrow. The emphasis is on developing the brands in an entrepreneurial environment, growing the businesses rather than simply focusing on cost control as a means to higher profitability in the short term. Given the strengths of our businesses and the quality of our people, I see great potential to attain these objectives and for Richemont to continue to grow organically.
Richemont’s businesses are amongst the world’s leading companies in their respective fields. We aim to maintain and enhance these positions.
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| NORBERT PLATT Group Chief Executive Officer |
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