Analysis of Sales and operating Results by Business Area

Sales and the operating results of the Group’s main areas of activity were as follows:

	March 2006 €m	March 2005 €m
Sales
Jewellery Maisons	2 227	1 938	+ 15%
Specialist Watchmakers	1 063	870	+ 22%
Writing Instrument Maisons	497	424	+ 17%
Leather and Accessories Maisons	283	259	+ 9%
Other Businesses	238	180	+ 32%
Total sales	4 308	3 671	+ 17%
Operating results
Jewellery Maisons	616	456	+ 35%
Specialist Watchmakers	227	145	+ 57%
Writing Instrument Maisons	83	58	+ 43%
Leather and Accessories Maisons	(38)	(41)	+ 7%
Other Businesses	22	2	-
	910	620	+ 47%
Corporate costs	(169)	(59)	+186%
Central Support Services	(154)	(132)	+ 17%
Other operating income/(expense)	(15)	73	-

Operating profit	741	561	+ 32%
Further analysed as follows:
Underlying operating profit from luxury business	713	485	+ 47%
Non-recurring items – luxury business	28	-	-
Operating profit from luxury business	741	485	+ 53%
Gain on partial disposal of interest in BAT	-	76	-
Operating profit	741	561	+ 32%

In the table above, those Maisons which are principally engaged in a specific business area have been grouped together. Accordingly, those businesses which have a heritage as producers of high jewellery and jewellery watches – Cartier and Van Cleef & Arpels – are grouped together as ‘Jewellery Maisons’. Their entire product ranges, including watches, writing instruments and leather goods, are reflected in the sales and operating result for that segment. Further information regarding the Maisons’ business development during the year is presented on pages 11 to 35 of this report.

Following the introduction of IFRS 2 Share-based Payment, charges for stock options have been allocated, in both periods, to operating costs within the relevant business areas and central support services.

Jewellery Maisons

With double-digit growth in all regions, jewellery Maisons sales increased by 15 per cent. During the year, Cartier successfully launched several new jewellery collections, as well as new models from the Maison’s watch lines. The Maison’s boutique network was further enhanced by the restoration of its Parisian flagship boutique and a new boutique in Tokyo. Van Cleef & Arpels’ continuing development reflected product launches in high jewellery and watches.

The segment as a whole generated an operating profit of € 616 million and an operating margin of 27.7 per cent, 4.2 percentage points above the prior year’s level. The increase in operating profit included one-off asset disposal gains amounting to € 19 million.

Specialist Watchmakers

The Group’s specialist watchmakers reported a 22 per cent increase in sales and an increase in the operating margin from 16.7 per cent in the comparative year to 21.4 per cent. The rate of growth reflects developments across all regions, the highest rate of growth being seen in the Americas region.

The good growth attests to the success of new products launched at the Geneva Salon International de la Haute Horlogerie in April 2005.

Writing Instrument Maisons

Richemont’s Writing Instrument Maisons, Montblanc and Montegrappa, reported total sales growth of 17 per cent. This increase in sales partly reflects Montblanc’s growth as a retailer, with one third of the Maison’s sales now being made directly to customers through the Group’s own network. Despite the higher costs associated with retail activities, operating profit increased by 43 per cent and the operating margin increased from 13.7 per cent to 16.7 per cent.

Leather and Accessories Maisons

Alfred Dunhill’s strong growth in the Asia-Pacific region offset flat sales in Europe and Japan, leading to an overall 8 per cent increase in sales. Sales of leather goods increased by 19 per cent. However, overall operating losses increased to € 30 million, reflecting provisions linked to poor performance in the accessories division and management changes.

Lancel achieved double-digit sales growth, despite the poor economic climate in France, the Maison’s principal market, benefiting from expansion in Japan and other international markets. Operating losses of € 8 million were half those of the comparative year.

Other Businesses

Excluding the impact of the disposal of Hackett, which was sold in June 2005, sales of the Group’s other businesses increased by 66 per cent over the prior year.

Chloé’s outstanding success continues, with sales more than doubling despite the strong growth seen already in the comparative year. Very strong demand for new product lines, new store openings and strong wholesale sales contributed to this success.

Operating profit

Operating profit before corporate costs totalled € 910 million, an increase of 47 per cent over the comparative period. This reflects the increase in sales, a higher gross margin contribution and continuing cost control. As a result, the operating margin before corporate costs increased from 17 per cent to 21 per cent. Central support services represent strategic management as well as marketing and functional support, legal services, manufacturing and logistics, intellectual property, finance, human resources and information technology together with central marketing initiatives.

Good trading results have resulted in an improvement in the operating profit margin from 15.3 per cent to 17.2 per cent. Excluding the disposal gains and similar items from both years, the operating margin from luxury businesses increased from 13.2 per cent to 16.6 per cent during the year under review.