Compagnie Financiere Richemont : Corporate Document

COMPANY ANNOUNCEMENT

21 MAY 2021

RICHEMONT ANNOUNCES

STRONG FINANCIAL PERFORMANCE

FOR THE YEAR ENDED 31 MARCH 2021

Financial highlights

• Due to closures of points of sales, logistics centres and manufacturing sites, as well as the halt in international tourism resulting from the Covid-19 pandemic, sales contracted by 25% at constant exchange rates and by 26% at actual exchange rates in the first half of the financial year
• As initial lockdown measures began to ease, sales grew by 17% and by 12% at constant and actual exchange rates, respectively, in the second half of the financial year compared to the same period in the prior year
• Fourth quarter sales growth of 36% and 30% at constant and actual exchange rates, respectively, containing the decline in full year sales to 5% at constant exchange rates and 8% at actual exchange rates
• Strong start into the new financial year, with accelerating trends across all business areas
• Strong performance led by Jewellery Maisons, online retail and Asia Pacific; discipline and agility in exceptional circumstances
• Triple-digitgrowth at Group Maisons' online retail sales underscores the success of our Maisons' digital transformation; overall online retail sales grew by 6% at actual exchange rates, accounting for 21% of Group sales
• Solid retail sales, up at constant exchange rates, notwithstanding severe disruption from recurring widespread temporary closures of points of sales
• Jewellery Maisons grew sales beyond pre-Covid levels and increased operating margin to 31.0%, supported by strong double-digit sales growth in the second half of the year
• Digital enabling more diverse customer journeys and underpinning retail sales; increased direct engagement with end clients, now accounting for around ¾ of sales
• Strong performance in mainland China contributing to 19% sales growth in Asia Pacific, where year-on-year sales rose by triple digits in the fourth quarter
• Operating margin improved to 11.2% and profit for the year increased to € 1 289 million, impacted positively by net finance income
• Significant increase in net cash position to € 3 393 million, supported by strong cash flow from operating activities and strict working capital management
• Proposed dividend of CHF 2.00 per 1 A share / 10 B shares

Key financial data (audited)

	2021	2020	Change
Sales	€ 13 144 m	€ 14 238 m	-8%
Gross profit	€ 7 861 m	€ 8 611 m	-9%
Gross margin	59.8%	60.5%	-70 bps
Operating profit	€ 1 478 m	€ 1 518 m	-3%
Operating margin	11.2%	10.7%	+50 bps
Profit for the year	€ 1 289 m	€ 931 m	+38%
Earnings per A share/10 B shares, diluted basis	€ 2.296	€ 1.646	+39%
Cash flow generated from operating activities	€ 3 218 m	€ 2 370 m	+€ 848 m
Net cash position	€ 3 393 m	€ 2 395 m	+€ 998 m

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Chairman's commentary

Overview of results

In a year marked by the outbreak of Covid-19 our first concern was the health and safety of our colleagues, clients and partners. Our company acted pro-actively, shutting down offices, factories, distribution centres and boutiques, whilst also helping in the fight against the pandemic by providing material and financial support.

During this unprecedented level of global disruption, all of our colleagues have demonstrated remarkable agility and discipline, adapting rapidly in the face of repeated closures, a halt in international tourism and an overall lack of visibility. As a result, our Maisons and businesses delivered a resilient performance and made good progress on Richemont's transformation agenda.

Following a sharp decline in the first half of the financial year as the health crisis spread across the globe, sales recovered throughout the year and reached € 13 144 million, led by the Jewellery Maisons, online retail and Asia Pacific. Fourth quarter sales increased by 30% and 36% at actual and constant exchange rates, respectively, mitigating the rate of sales decline for the year as a whole to 8% at actual exchange rates and 5% at constant exchange rates. At actual exchange rates, sales in Asia Pacific grew by double digits, underpinned by strong sales in mainland China due to a strong local presence of our Maisons.

As our Maisons and businesses adapted rapidly to changing levels of demand and the differing ways customers wanted to interact, our transformation accelerated, and we advanced our understanding of the customer journey and client preferences via digital tools. Online, mobile and distant shopping have proven to be key growth drivers, and we have seen a sharp increase in clients favouring those channels. Higher online retail sales, benefiting from triple-digit growth at our Maisons, partially offset lower retail and wholesale sales. Direct engagement with end clients generated around three quarters of Group sales, through offline and online retail channels.

The Jewellery Maisons posted higher sales, exceeding pre-Covid levels, and a solid 31% operating margin underlined the enduring appeal of Cartier, Van Cleef & Arpels and Buccellati. We are pleased with the leadership positions of Cartier and Van Cleef & Arpels as well as with the international expansion of Buccellati which is progressing well. At the Specialist Watchmakers, the double-digit sales increase in Asia Pacific, partly supported by the opening of five flagship stores on Alibaba Tmall Luxury Pavilion and participation in Watches & Wonders fairs in Shanghai and Sanya, only partially mitigated contraction in other regions.

Over the past few years we allocated substantial financial and human resources into two areas: we restructured our watch division and we further developed our Group's Online capabilities. These investments are beginning to bear fruit.

Our Specialist Watchmakers division is in a very healthy state. The desirability of our Maisons has been fuelled by the reinforcement of iconic collections with well received new references, and our strongest-ever resonance during Watches & Wonders. The 'new retail' initiatives have accelerated direct engagement with the end client, notably through the aforementioned Tmall Luxury Pavilion flagship stores and numerous remote digital interactions with clients. The quality of the Specialist Watchmakers network has improved, and subsequently 73% of the division sales are now through internal and franchise stores. Sales to our local clientele in our retail network grew by double-digits, which partly mitigated the contraction in inbound tourism. Stock with our multi-brand watch

retail partners ended lower than a year ago, with sell-out greater than sell-in for the fourth consecutive year. Operational costs have been streamlined, and redirected at transforming the division towards a client centric 'new retail' business model. The division's recovery has been constantly accelerating from the third quarter of our financial year, with the first four months of the calendar year trading above 2019 levels, when corrected for a significant stock rebalancing.

The Group's digital transformation has further accelerated, and we are experiencing triple-digit growth in our Maisons' online retail sales, in all our major markets. The objective of the Group's 'Luxury New Retail' business model is to provide a superior route to market for our Maisons, while delivering much improved economic performance compared to the traditional luxury business model.

Richemont's strong balance sheet provided ample resources to finance the €253m investment in convertible notes issued by Farfetch last November, a first step in our partnership with Farfetch and a deepening of our relationship with Alibaba, as we accelerate our journey towards 'Luxury New Retail'. To date, our partnership with Alibaba has led to 11 flagship stores being operational on Alibaba Tmall Luxury Pavilion: Cartier, Van Cleef & Arpels; IWC Schaffhausen, Jaeger-LeCoultre, Panerai, Piaget and Vacheron Constantin; NET-A-PORTER; Chloé, dunhill and Montblanc.

Despite distribution centre disruption and closures contributing to a sales decline at the Online Distributors, the businesses benefited from positive trends at YOOX and THE OUTNET, as well as the localisation of websites. Watchfinder has deepened its collaboration with our Maisons, with their 'part exchange' programme now rolled out in more than 80 Specialist Watchmakers boutiques. The new fiscal year has started at an accelerated pace, with triple-digit growth compared to the previous year, and strong double-digit growth compared to 2019.

We see increasing client demand for more choice, newness, and "see-now - buy-now", accelerated by the penetration of digital and ATAWAD (Any Time, Anywhere, Any Device). However, clients also want a more personalised touch, styling advice, curation, and access to the voices behind the brand, far from the catalogue approach offered by some platforms.

NET-A-PORTER and YOOX are transitioning to hybrid models to complement their wholesale offer, better meet client demands and lessen capital requirements. NET-A-PORTER and MR PORTER have been leaders in digital selective distribution for the past 20 years, based on solid direct relationships with over 1 000 Luxury partner brands. These stores are now evolving towards a model that combines curated inventory ownership and e-concessions with top brands. This preserves the curatorial dimension of NET-APORTER and MR PORTER while allowing them to enrich the breadth of their offering with very light additional capital commitment. In parallel, YOOX will see the addition of a marketplace to its existing 1P model in the beginning of calendar year 2022, expanding the current offering from over 14 000 brands to include more choice and new product categories.

The technology supporting this, which also powers the omnichannel of several top brands, is gradually converging towards a "one Luxury New Retail platform" model for hard and soft luxury. Furthermore, the YNAP joint ventures in China with Alibaba and in the Middle East with Symphony have been particularly

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successful this year - doubling in China and growing by double- digits in the Middle East - thus highlighting the benefits of a local route-to-market for more reach and relevance. YNAP will continue to accelerate its localisation with more than 15 countries planned for this year.

'Luxury New Retail' is propelling our Maisons to new levels, supported by our strategic partnership with Alibaba. Our Maisons and businesses benefit substantially from the exponential customer aggregation of the Tmall Luxury Pavilion platform, and are able to offer a superior customer experience through the digital platform's real-timedata-rich ecosystem.

In addition, our 'Luxury New Retail' developments in mainland China are providing the Group with the incubator of the future luxury retail model, where customer shopping journeys will benefit from a seamless online/offline experience. Our developments with Alibaba are capturing the exciting new paradigm in luxury customer shopping trends - the digital platform ecosystem and the unique retail format. This is providing fresh impetus to our Maisons to enhance the customer experience, through a combination of online/offline shopping, social media engagement and live- streamed entertainment, also described as "shoppertainment".

Furthermore, new innovations such as the Watches & Wonders campaign on Alibaba's Tmall, including the new Super Brand Day concept, is one of the most exciting new aspects of 'Luxury New Retail', offering our Maisons new ways to strengthen brand communication and customer loyalty.

Lower sales at our Fashion & Accessories Maisons grouped under 'Other' reflected declines primarily in the wholesale channel due to a very sharp contraction in travel retail, while online retail sales grew by strong double digits, reaching 17% of sales. After years of underperformance we expect these Maisons to benefit from an enhanced "route to market" provided by new digital platforms.

Operating profit amounted to € 1 478 million. The year-on-year reduction was contained to 3% and operating margin improved to 11.2%, with profit for the year increasing to € 1 289 million. At the outset of the pandemic, the Group promptly implemented strict cash preservation measures which meant that our net cash position increased significantly to € 3 393 million.

Dividend

Given an improving economic environment, solid cash flow generation and attractive long-term prospects for the luxury goods industry, an improvement on last year's dividend seems justified. The Board therefore proposes to pay a cash dividend of CHF 2.00 per 'A' share (and CHF 0.20 per 'B' share), subject to shareholders' approval at the Annual General Meeting due on 8 September 2021.

Annual General Meeting and new Board Committee

At the Annual General Meeting in September 2020, the Board was delighted to welcome Wendy Luhabe as a new Non-Executive Director. Renowned as an entrepreneur and social activist, Ms. Luhabe has also joined the new Governance and Sustainability Committee established on 18 March 2021.

The purpose of this new Committee is to assist the Board in reviewing and approving management proposals regarding strategy, policies and monitoring of environmental, social and governance matters, as well as providing direction on best practice and ensuring compliance with all relevant requirements. Its creation reflects the importance of such topics to the Group and represents

active engagement from the highest levels of Richemont's organisation.

The Movement for Better Luxury

Richemont has a long-standing commitment to doing business responsibly. Our Maisons have been in existence for hundreds of years and create products designed to be handed down from generation to generation. The Group has been a leading member of the Responsible Jewellery Council (RJC) from the start, carbon neutral through offsets since 2009, and supported nature and communities through the Peace Parks Foundation since its inception.

In 2019, acknowledging that tougher measures needed to be taken to minimise our impact on the planet and play our part as a good citizen, we stepped up our efforts with the 'Movement for Better Luxury', our transformational CSR strategy. Through this framework, we want to: enable our colleagues to thrive through diversity and empowerment; positively impact the communities we touch; improve sustainability in our supply chain, and reduce our negative environmental impact.

This year, we have made strong progress across our main focus areas in alignment with the UN's Sustainable Development Goals. Today, over 95% of the gold we purchase is RJC Chain of Custody certified and comes from recycled origins. We are working to finalise our formal commitment to Science-Based Targets in line with the Paris Agreement. There are many more initiatives, either completed or underway, which we will update you on in our 2021 Sustainability Report in July.

Outlook

Although the pace of vaccination has gathered momentum, volatility and low visibility are likely to prevail until there is herd immunity. There are still concerning Covid-19 developments in parts of the world that could slow down a global recovery, even though underlying demand seems strong with supportive central bank actions, substantial government stimulus packages, and real estate and stock markets at all-time highs. We will need to learn how to live with the virus probably for much longer than we had hoped. Our focus will therefore remain on safeguarding our colleagues, partners and assets while maintaining the necessary agility and flexibility to face uncertainties. We will also continue taking decisive action to transform our business with a focus on digital initiatives, customer-centricity and forging strategic partnerships.

Before concluding this commentary, I would like to pay tribute to our dear friend and colleague Alber Elbaz, who very tragically passed away in April and had just successfully launched AZ Factory. Alber was incredibly sensitive and caring, and, in addition to his genuine empathy, possessed great wit, talent and creativity. His dream of 'smart fashion that cares' was inclusive, positive and innovative. He will be hugely missed by all of us who had the good fortune to know him or work with him.

Finally, I would like to thank all my colleagues at Richemont for the strong performance they have delivered with courage, solidarity, creativity and discipline in exceptional circumstances. Together, we will craft the future.

Johann Rupert

Chairman

Compagnie Financière Richemont SA

Geneva, 21 May 2021

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Financial review

Any references to Hong Kong SAR, Macau SAR and Taiwan within this financial review are to Hong Kong SAR, China; Macau SAR, China; and Taiwan, China respectively.

Sales

Richemont has reported a strong performance in exceptional circumstances. Due to closures of points of sales, logistics centres and manufacturing sites, as well as the halt in international tourism resulting from the Covid-19 pandemic, sales contracted by 26% at actual exchange rates and by 25% at constant exchange rates in the first half of the financial year. As initial lockdown measures began to ease, the Group's Maisons and businesses demonstrated remarkable agility and resilience to adapt to clients' demands, with sales growing by 12% and by 17% at actual and constant exchange rates, respectively, in the second half of the financial year compared to the same period in the prior year. In the fourth quarter of the financial year, sales increased by 30% and 36% year-on-year at actual and constant exchange rates, respectively. Overall, the decline in sales for the year was contained to 8% at actual exchange rates and to 5% at constant exchange rates.

At actual exchange rates, sales in the Middle East and Africa were broadly in line with the prior year. Double-digit sales progression in Asia Pacific, fuelled by mainland China's triple digits increase in sales, mitigated the decline in other regions.

Online retail sales grew by 6% for the year, supported by triple- digit increases at our Maisons, emphasising the success of the Group's ongoing digital transformation. Sales in the Group's directly operated boutiques were broadly in line with the prior year and showed growth at constant exchange rates, demonstrating our Maisons' ability to overcome widespread temporary closures. The pronounced 27% decrease in wholesale sales reflected exposure to travel retail, as well as multi-brand retailers' lower exposure to online retail and relatively longer temporary store closures in Europe versus other regions.

The Jewellery Maisons sales exceeded pre-Covid levels with 3% growth, highlighting the continued strength of Cartier and Van Cleef & Arpels. The other business areas experienced a decline in sales for the full year, with all business areas returning to growth in the latter part of the year.

Further details on sales by region, distribution channel and business area are given under Review of Operations.

Gross profit

At € 7 861 million, gross profit was 9% lower than the prior year, and gross margin stood at 59.8% of sales. The 70 basis point reduction in gross margin is mainly due to lower levels of manufacturing capacity utilisation, the impact of a stronger Swiss franc on costs, higher gold prices and a higher sales mix towards locations with relatively higher import duties, such as mainland China.

Operating profit

Operating margin increased to 11.2% compared to 10.7% a year ago with operating profit being 3% lower to € 1 478 million. This 50 basis point margin improvement reflects tight control of net operating expenses, which decreased by 10% and outpaced the rate of sales decline. The Group also benefited, albeit to a lesser extent, from short-time work subsidies, government grants and rent relief, all directly linked to Covid-19 relief measures.

Selling and distribution expenses declined by 8%, in line with sales. Stringent cost management and the aforementioned rent relief and subsidies more than offset higher depreciation linked to capital investments in prior years. Communication expenses, down 27%, contracted sharply, partly due to the cancellation of physical events, and represented 7.8% of Group sales, down from 9.9% in the prior year. Fulfilment expenses of € 356 million, recorded across the Group's e-commerce activities, primarily at the Online Distributors, grew by 1%. Administrative expenses decreased by 5%, despite a stronger Swiss franc and continued expenditure in IT and digital, notably in 'new retail' initiatives. Excluding short-time work subsidies and government grants, administrative expenses declined by 2%. Other operating expenses of € 272 million included the impact of the amortisation of intangibles recognised on acquisitions, primarily relating to the Online Distributors and Buccellati.

Profit for the year

Profit for the year increased by 38% to € 1 289 million. This

• 358 million increase included a € 294 million reversal in net foreign exchange losses on monetary items and a € 255 million improvement in the fair value of financial instruments, both of these items unrealised and non-cash effected at 31 March 2021. Earnings per share (1 'A' share/10 'B' shares) increased by 39% to € 2.296 on a diluted basis.

To comply with the South African practice of providing headline earnings per share ('HEPS') data, the relevant figure for headline earnings for the year ended 31 March 2021 was

• 1 316 million (2020: € 984 million). Basic HEPS for the year was
• 2.328 (2020: € 1.742), diluted HEPS for the year was € 2.322 (2020: € 1.736). Further details regarding earnings per share and HEPS, including an itemised reconciliation, may be found in note 30.3 of the Group's consolidated financial statements.

Cash flow

At € 3 218 million, cash flow generated from operating activities was € 848 million higher than last year due to a resilient operating profit and strict cash protection measures. Reductions in inventory and increased creditor balances, partially offset by an increase in receivables, resulted in an inflow from working capital of € 529 million.

Net investment in tangible fixed assets amounted to € 372 million, a € 196 million reduction over the prior year. Investments primarily related to the selective renovation and relocation of existing boutiques in the Maisons' store network and continued investments in technology, primarily at the Online Distributors.

The 2020 dividend of 1.00 per share (1 A share/10 B shares) was paid to shareholders and to South African Depository Receipt holders, net of withholding tax, in September 2020. The overall dividend cash outflow in the period amounted to € 529 million (2019: € 1 017 million).

During the year under review, the Group did not acquire any treasury shares to hedge executive stock options. However, within the framework of the 2020 equity-based shareholder loyalty scheme, the Group received 17.8 million warrants (see note 31.2) at no cost in respect of treasury shares held on the date of issue and purchased a further 89.0 million warrants at a total cost of

• 15 million (2020: nil). These warrants will be used, together with the treasury shares, to provide a comprehensive hedge of the Group's potential obligations arising from its share option and restricted share unit plans. Proceeds from the exercise of stock options by executives and other activities related to the hedging

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programme amounted to a net cash inflow of € 32 million (2020: € 13 million).

Balance sheet

At 31 March 2021, inventories amounted to € 6 319 million, a

• 339 million decline over the prior year (2020: € 6 658 million). Inventories represented 18.3 months of cost of sales (2020: 17.8 months).

At 31 March 2021, the Group's net cash position rose to € 3 393 million (2020: € 2 395 million). The € 998 million improvement versus the prior year can be attributed to the significant

• 848 million increase in cash flow from operating activities and a € 184 million reduction in investment in tangible fixed assets. This improvement more than compensated for the € 253 million (US$ 300 million) investment in convertible notes issued by Farfetch, as announced on 5 November 2020. The Group's net cash position included 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.

Shareholders' equity represented 51% of total equity and liabilities compared to 57% in the prior year.

Proposed dividend

In view of the Group's strong results and improving economic environment, the Board has proposed a dividend of CHF 2.00 per 'A' share/10 'B' shares.

The dividend will be paid as follows:

	Gross dividend per	Swiss withholding	Net payable per
	1'A' share/	tax @ 35%	1'A' share/
	10 'B' shares		10 'B' shares
Dividend	CHF 2.00	CHF 0.70	CHF 1.30

The dividend will be payable following the annual general meeting which is scheduled to take place in Geneva on Wednesday, 8 September 2021.

The last day to trade Richemont 'A' shares and Richemont South African Depository Receipts cum-dividend will be Monday 20 September 2021. Both will trade ex-dividend from Tuesday 21 September 2021.

The dividend on the Compagnie Financière Richemont SA 'A' shares will be paid on Thursday 23 September 2021 and is payable in Swiss francs.

The dividend in respect of Richemont South African Depository Receipts will be payable on Wednesday 29 September 2021 and is payable in rand to residents of the South African Common Monetary Area ('CMA') but may, dependent upon residence status, be payable in Swiss francs to non-CMA residents. Further details regarding the dividend payable to South African Depository Receipt holders may be found in a separate announcement dated Friday 21 May 2021 on SENS, the Johannesburg Stock Exchange news service.

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