Compagnie Financière Tradition S.A.

And welcome to Richemont 2023 for your results presentation. Thank you to those in person for coming to Geneva. Much appreciated. And also to those of you watching the webcast. I am Sophie Cagnard, and joining today from Richemont are Johan Ruppert, chairman, Jérôme Lambert, CEO, Burkhard Grun, CFO, Cyril Vigneron, Cartier CEO, and Nicolas Boss, Van Cleef & Arpels CEO. As usual, the company announcement and financial presentation can be downloaded from richmond.com, and the replay of this video webcast will be available on our website today from 3 p.m. Geneva time. Before we begin, may I draw your attention to the disclaimer on our presentation and company announcement regarding forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. So, first, Jérôme will take you through the year's highlights and sales, and then Burkhart will review our business areas, the group's financials, and key ESG initiatives. He will then hand back to Jérôme for the conclusion, which will be followed by a Q&A session. I will now hand over to Jérôme.

Thank you, Sophie, and good morning. Ladies and gentlemen, thank you for joining us today. I'm pleased to report that notwithstanding the ongoing volatile and uncertain environment, our financial results reached several new heights this year. Sales for the year rose by 3.2 billion euros to close to 20 billion euros. having increased by 14% at constant exchange rate and 19% at actual exchange rates. Operating profits rose by €1.3 billion to €5 billion, partially benefiting from lower one-time items compared to the prior year. These strong results led to an operating margin of 25.2%, up 280 basic points year-on-year. Profit for the year from continuing operation increased by 60% to 3.9 billion euros. Cash flow from operating activities reached 4.5 billion euros and our net cash position increased by 1.8 billion euros from last September to 6.5 billion euros. The strong results achieved by our group were broad-based, sales increased across all regions, distribution channels, and business areas, with double-digit increase in almost all regions, led by particularly strong growth in Japan and Europe. Retail sales, once again, showed a marked outperformance with a solid double-digit progression, reflecting continued demand for the high-quality craftsmanship and excellence of our products. Our direct-to-client shares has increased overall to present 74%, yet another increase versus prior year, highlighting the continued transformation of our business model. And finally, through our significant growth across all business areas, the operating margin improved across all continuing business areas, as Burkhardt will detail shortly. The group further progressed on its ESG journey. Let me share a few highlights. We have reinforced our ESG platform foundation and strengthened our commitment to embedding ESG in our operation. This is evidenced by both our chief sustainability officer and chief people officer and CEO of region joining the senior executive committee this year. We phased out our PVC from our products and packaging by our target timeline and reached 97% use of renewable electricity. We have been recognized as an empire of excellence in Switzerland, France, and China. Richemont was naturally nominated for the third consecutive year as the winner of the 2022 100 Excellence Employees of China Award, as well as the 2022 Excellence in Diversity and Inclusion Award sponsored by 51Job. Let me now walk you through the group sales performance. First by region, then by distribution channel, What we saw this year is the group's strongest performance in Japan and across Europe. Japan led the way with 56% increase in sales at constant exchange rate, with strong double-digit increase across all channels and business areas. Sales in Europe were 31% higher than the previous year, driven by outstanding growth in both retail and wholesale channel, and a solid performance across all business areas, with strengths in main location led by France, Italy, and Switzerland. Sales included strong contribution from locals and benefited from inbound tourism, mainly from the US and the Middle East. In Asia Pacific, mainland China and Macau were heavily impacted by health restrictions during the year. Excluding these two locations, And Hong Kong, sales in the region rose by over 30%, with significant double increase in Southeast Asia, most notably in Australia, Singapore, and Thailand. Sales in Middle East and Africa region grew by 13%, driven by solid domestic inbound tourists spending predominantly in Dubai and in Qatar. The largest absolute contribution to group sales growth came from Europe and the Americas, with each growing by around 1 billion euros. Sales in the fourth quarter progressed by 22% year on year, with double-digit increase in all regions. On top of that, what was a very challenging comparative with the highest growth rate generated by Japan and Asia Pacific. It is worth highlighting that the first quarter also showed a significant improvement compared to the third quarter in both America and Asia-Pacific, the latter benefiting from a combination of the Chinese New Year holiday and easing of restrictions in China. Let us now turn to sales by distribution channel, starting with retail. At Constantrate, where directly operated store contributed to 68% of the group sales compared to 66% in the prior year. The solid 17% growth come from on top of a challenging comparative prior year. There were double digit increase across almost all region, notably in Europe and Japan, led by strong growth at the jewelry maison and the specialist watchmaker. Retail sales benefited from 23 new stores opening, mainly in Asia Pacific region. Fourth quarter sales posted a sharp 24% increase over the previous period. The online channel, comprising the group's online sales directly generated by the group's maison and watch finder, contributed 6% of group sales, broadly in line with the previous year. Sales rose by 6%, with growth led by double increase in America, Japan, Middle East, and Africa. Performance in the channel was fueled by robust growth in the specialist watchmaker, which showed an increase in all regions. Sales in the fourth quarter were slightly up year-on-year with pressure. Finally, wool sales Comprising 26% of whole sales, whole sales grow by 8% with strong double digit increase in all regions except Asia Pacific. And it was driven by most business areas. Fourth quarter sales significantly increase year on year while facing a very challenging comparative in the prior year period. As a consequence, the group's proportion of direct-to-client sales, which includes sales in our directly operating store and online retail sales, increased to 74% of group sales. The jury maison continued to have the highest rate of direct-to-client sales at 83%. The specialist watchmaker had the highest progression in their direct-to-client sales from 51% to 56%, sustained by the development of their retail and online capabilities. Burkhart will now take you through the year highlight by business area. Over to you, Burkhart.

Thank you, Jerome. Let me review our business areas with all numbers at actual rates and starting with the jewelry maisons. Sales increased by 21% for the year with broad-braced growth across all regions and channels. Sales were particularly strong in Japan, Europe, and in the retail channel. The fourth quarter saw a 27% increase in sales year-on-year with very strong growth across all regions. The jewelry maison's operating margin reached almost 35%, a 60 basis point improvement over the prior year. This high margin reflects the good operating leverage generated by a combination of the sharp sales increase, increased utilization of manufacturing facilities, and well-controlled costs, while continuing to invest in distribution and communication. Let us now look at the main developments during the year. The year saw strong performance across all jewelry maisons, all product segments, and all price points, especially from our maison's iconic product lines. In jewelry, this included Panthère and Trinity at Cartier, Alhambra and Fauna at Van Cleef & Arpels, and Macri and Operatul at Bucciolati. In watches, there was notable performance from Panthère and Santos at Cartier, and from extraordinary objects at Van Cleef & Arpels. In December, Cartier relaunched their iconic Grande Café jewelry collection, which was originally introduced in the 1930s by Jean Toussaint, with early signs of strong demand. Van Cleef & Arpels has continued to extend its Perlier collection both for jewelry and timepieces. Our maisons are increasing their manufacturing capacity in order to support the strong demand they are experiencing with the opening of a new manufacturing site in Italy for Cartier and the expansion of two ateliers in Italy for Bucciolati. Van Cleef & Arpels is currently investing in a new manufacturing facility in Lyon with additional manufacturing sites to be added over the coming years. Cartier has continued its store upgrade program, with 51% of stores already under its new concept, a material increase from 38% at the end of the previous year. Recent reopenings include Rue de la Paix in Paris, George Street in Sydney, and Maison Chandam in Seoul. with 11 net new store openings, reached out into new territories with a store opening in Auckland, New Zealand, and opened in new cities such as San Francisco. The five new boutiques at Buccellati included mostly openings in Asia. There have been several notable ESG initiatives during the year. Cartier's new manufacturing site in Torino assures environmental best practices. These include solar panels expected to provide 20% of the site's electrical needs and an investment into a hydroelectric power station that produces energy to power the facility in Torino as well as a new facility being built in Valencia. Van Cleef & Arpels continued its Demain Sans Main initiative to support the transmission of know-how in jewellery. And a few months ago, Pucillati achieved the RGC-COP certification and should be RGC-COC certified by December 2023. Let us now review our specialist watchmakers, where sales rose by 13% for the full year. These were double-digit increases at many maisons and across almost all regions, except for Asia-Pacific, which posted a slight reduction. By channel, both retail and online retail rose by double digits. Both quarter sales also increased by double digits, led by retail sales. The business area's operating margin was up 170 basis points to 19%. This 24% increase in operating result outpaced the rate of increase in sales, with this strong operating leverage largely due to the combination of double-digit sales growth, pricing power, as well as continued cost discipline. Let's now look at some of the key developments over the past year. There was solid performance from both iconic core collections and bestsellers, including notably the Polo at Piaget, the Verso at Jaeger-LeCoultre, Pilot's Watches at IWC, Overseas at Vacheron, Constantin, Luminor at Panerai, and Lange 1 at A. Lange & Söhne. Continued increase in direct-to-client sales, now at 56%, or 500 basis points higher than the prior year, underlines the successful retail transformation from having a majority of sales in wholesale to majority of sales directly with end clients, including the franchise monobrand boutiques that are accounted for under the wholesale channel. Proportionate sales in monobrand environment increased to close to three quarters of sales as a consequence. There have been several flagship store openings aimed at providing an elevated client experience. It would be good if the prompter would advance now. Thank you. These openings include the new IWC Taiku Hui store in Shanghai, where clients can immerse themselves in the distinctive themed environments to discover the various product collections. Vachon Constantin's reopened flagship store in the Dubai Mall offers the opportunity to interact with watchmaker onsite or browse the Vachon Constantin archives digitally in a large screen format, among other unique features. The further rollout of the innovative Time Valley multi-brand boutique concept included 16 new openings during the year, bringing the total now to 38 boutiques. New openings have taken place in China and also in other key cities such as Doha or Luzern. New formats are being tested, such as a new digital boutique in India and a first ever opening on a cruise ship. This year, the specialist watchmakers have strengthened the role of their heads of sustainability, either through recruitments or upskilling, making these positions more strategic and embedded in business decision making. All the maisons went through an ESG skills development process, including at the CEO level. Finally, let us move to the other business area, which primarily includes the group's fashion and accessories maisons, the group's unbranded watch component manufacturing and real estate activities, amongst others. Sales rose by 19% year-on-year, sustained by strong performance by the fashion and accessories maisons, while watch finder sales were negatively impacted by lower demand from the UK domestic clientele and a subdued pre-owned watch market. The growth in sales was led by very high growth rates in the Americas and Middle East and Africa. There was strength across all channels. Sales in the fourth quarter recorded a double-digit progression equally led by the Americas and the Middle East and Africa. The negative watch finder impact was more than offset by the 94 million euro profit generated by our fashion and accessories maisons due to higher sales, improved pricing power, and strong financial discipline. Overall, including all activities, the segment's operating result reached 59 million euros. Let us now look at some highlights of the past year. We've seen strong growth from collections such as the Meisterschuk writing instruments at Mont Blanc, crown sport clothing at Peter Muller and footwear at G4, and from the Brion and Tompet leather goods at Delvaux. Alaya and Chloe have been acclaimed for the new collections presented during the year, leveraging the momentum gained since the appointment of their creative directors, namely Peter Mullier and Gabriella Hurst. Another highlight has been the opening of the Mont Blanc House in Hamburg, dedicated to the Maison's purpose to inspire writing and showcase the history and heritage of writing instruments. Sales have benefited from enhancements in the retail network, namely Mont Blanc's new boutique concept in Paris, featuring a new in-store experience and key refurbishments at Chloé, with improved performance in the refurbished stores. Alaya and Delvaux have entered new regions with their first boutiques in the U.S. in New York, Soho, and in the Middle East in Dubai, respectively. Demonstrating continued progress in ESG, Chloé has introduced the Chloé Vertical Initiative. to place a unique digital ID on product labels, enabling users to trace their items from field to finished piece, and access their ownership certificate as well as care, repair, and resell information. Peter Miller has increased the use of recycled fabrics and upcycling unused products, while Chloé already used 62% of lower impact materials in its spring-summer 2023 ready-to-wear collection. Let us now turn to the group's financials, starting with gross profit, which increased significantly by 23% to 13.7 billion euros. This resulted in the gross margin rising by 200 basis points to an all-time high of 68.7%. The main drivers of the increase were a combination of more favorable geographical sales and channel mix, price increases, and higher manufacturing capacity utilization, which more than offset higher input costs. Let us now look at operating expenses, which were 17% higher than the prior year, while group sales increased by 19%, partly benefiting from lower one-time items. At constant exchange rates, operating expenses rose by 12% versus a 14% sales increase. I will now take you through the expenses by category. Selling and distribution expenses increased by 19% at actual exchange rates and by 15% at constant exchange rates, accounting for 54% of total operating expenses compared to 53% in the prior year. Most of the increase related to the development and enhancement of our retail network and the growth in retail sales, notably in Japan and South Korea, where many leases have variable rents. As a percentage of sales, selling and distribution expenses represented 23% of group sales in line with the prior year. Communication expenses were 17% higher at actual exchange rates and 12% higher at constant exchange rates to support sales. They represented close to 10% of group sales in line with a normalized 9% to 10% range. At around 1% of sales, now that YNAB is classified under discontinued operations, fulfillment expenses increased by 19% at actual exchange rates and by 13% at constant exchange rates. Administrative expenses rose by 20% and by 13% at constant exchange rates, mainly due to a stronger Swiss franc and planned investments in IT. At 8.5% of sales, administrative expenses were in line with the prior year. Other expenses of €103 million were €96 million lower than the prior year, primarily due to lower one-time items in the year under review. As a reminder, prior year numbers included charges related to the suspension of commercial activities in Russia And this year, under review, we incurred one-time charges of 66 million euros net, the main element being 55 million euros of watch finder goodwill impairment charges. The conclusion, net operating expenses as a percentage of group sales improved from 44.3% a year ago to 43.5% this year. Operating profit reached five billion euros, a new high for the group. This represents a 34% increase over the prior year and outpaced the 19% sales increase. As a result, the operating margin rose 280 basis points to 25.2% compared with 22.4% in the prior year. Let us now review the rest of the P&L items below the operating profit line, starting with financial income. Net finance costs improved to 314 million euros compared to 841 million euros in the prior year. This 527 million euro reduction was primarily related to the following items. Firstly, there were non-cash fair value adjustments of €54 million compared to €538 million in the prior year, a €484 million difference. These charges are linked to investments in a Farfetch convertible note as well as an option over additional shares in Farfetch China, whose values are driven by the variation of the underlying Farfetch share price, in addition to the group's investment in externally managed bond funds and money market funds. Secondly, net interest expenses, excluding those lease liabilities, improved by 46 million euros compared to the prior year level. And finally, a positive 56 million euro year-on-year gain on mark-to-market adjustment in respect of hedging activities was partly offset by 43 million euro increase in foreign exchange non-cash losses on monetary items. Sales at YNAB, now under discontinued operations, proved resilient given the challenging environment for digital distribution pure players, rising by 4% compared to the prior year. The operating loss at 3.6 billion euros was mainly driven by the 3.4 billion euro write-down of YNAB net assets. Over the full holding period of YNAB, the sum of both positive and negative valuation adjustments on acquisition and disposal of NAP and EUX investments amounted to a negative 1.3 billion euros. As of today, there is no change to the timing of the expected closing of the transaction previously communicated to you, this being by the end of calendar year 2023. Let us now turn to the profit for the year. Profit from continuing operations progressed significantly, rising 60% to 3.9 billion euros, with the profit margin increasing by 500 basis points to now 19.6%. The increase primarily reflected the higher operating profit and lower net finance costs just mentioned, partly offset by higher taxes. Profit for the year of 301 million euros was impacted by the 3.6 billion euro loss from discontinued operations. As indicated last November, our effective tax rate for the year for continuing operations was 18%, on the lower side of our envisaged 18 to 21% range, absent any special unforeseen items. Cash flow generated from operating activities was robust at 4.5 billion euros, reflecting a strong operating profit from continuing operations, offset by increased working capital requirements, mainly due to higher inventories to support sales growth and our further retailization of the group's businesses. Let us now turn to gross capital expenditure, which amounted to 981 million euros. As a percentage of group sales, this item reached 4.4% of sales, broadly in line with a year ago. 48% of gross capital expenditure related to point-of-sale investments, including internal and franchise boutiques, as well as external points of sale. Most of the spend was allocated to boutique renovations, upgrades, and relocations, notably at Cartier. This included renovations on Rue de la Paix in Paris, SKP Mall in Beijing, and Fifth Avenue in New York. Several additional maisons opened stores at the Chengdu SKP Mall in China, including Van Cleef & Arpels, Orchon Constantin, and Delvaux, to name just a few. Other investments, which made up 33% of CapFix, mainly related to IT spend. Finally, manufacturing accounted for the remaining 19% of gross capital expenditure, and related primarily to R&D, increased jewelry capacity and machinery, mostly at the jewelry maisons. Let us now turn to free cash flow, which amounted to €2.8 billion. The €213 million difference mainly reflected marginally lower cash from operating activities, higher capital expenditure, and the non-recurrence of the €86 million proceeds from the disposal of an investment property in the prior year. These items were partly offset by lower acquisition of other non-current assets, given that last year's numbers included the investment in the China joint venture with Alibaba and Farfetch. And now on to our balance sheet, which remains solid, with shareholders' equity accounting for 47% of the total assets. Net cash amounted to 6.5 billion euros at the 31st of March 2023, up 1.3 billion euros over the prior year as a result of the items discussed on the previous slide, and notwithstanding an 810 million euro increase in total dividend cash outflow. The board has proposed a total dividend of 3.5 Swiss francs per one A share or 10 B shares, made up of an ordinary dividend of 2.5 Swiss francs per one A share or 10 B shares, up by 11% over the prior year, and another special dividend of one Swiss franc per one A share or 10 B shares, subject, obviously, to shareholders' approval at the annual general meeting on the 6th of September, 2023. This proposed increase of the ordinary dividend and the additional special dividend reflected the group's strong results, significant cash flow generation, and robust net cash position. Let me now share an update on our ESG progress. In terms of external recognition, Richemont was acknowledged as an industry leader with an AA rating by MSCI for its low exposure and management of ESG risks, notably in terms of responsible sourcing and carbon footprint management. Richemont received a 13.9 risk rating score from the ESG rating agency Sustainalytics for its low risk exposure and strong management, positioning the group among the top 7% of the 20,000 companies rated. The group was also recognized as one of the world's best employers by Forbes for the third consecutive year. On the environment pillar of ESG, Richemont has been acknowledged by CDP for its actions in water management, improving to a B score in 2022 for our second year reporting. This year, for the first time, we disclosed our water withdrawal from surface water and seawater in alliance with GRI standards. A member of the RE100 since 2021, we have reached 97% of renewable electricity across all our sites and are well on track to achieve our ambitious goal of 100% renewable electricity for 2025. We have met another key milestone with a complete phase-out of PVC, as discussed by Jerome already, from our products and packaging. In line with our commitment to monitoring resource consumption and reducing waste, waste sent to landfill decreased by 61% in 2022, amounting to a reduction of 870 tons. Finally, as part of our strategy to manage greenhouse gas emissions, we have successfully migrated 89% of our service to the cloud, reducing our energy consumption and optimizing our data storage. In terms of advancing our social priorities, we value being named one of the most attractive employers in Universum's national rankings for Switzerland, France, and China. These accolades affirm Richemont's commitment to offering a strong workplace culture based on trust and creating opportunities for our people. We're notably fully certified gender equal pay by the Equal Salary Foundation in Switzerland and France, two of our largest markets in turn of headcount, and are on track to become 100% equal pay certified worldwide by next year. Our group has a healthy gender balance, the percentage of women reaching 57% of the total workforce, 40% of our senior executive committee, and 31% of our board. Now turning to governance, where we initiated comprehensive changes across our group functions, regions, and to fully integrate ESG principles into our strategic and operational decision-making processes. Reinforcing the importance of this transversal discipline, we appointed Dr. , the group's chief sustainability officer, to the senior executive committee. Taking compliance-driven approach, our ESG reporting is now in accordance with the GRI standards. We have added content to meet new EU and Swiss regulatory requirements, including the new Swiss conflict minerals and child labor due diligence and transparency obligations. Long, long title, I know. As well as the EU's corporate sustainability reporting directive. We have further strengthened our ESG frameworks foundations, with priorities drawn from an updated double materiality matrix to best identify and assess ESG impacts. Finally, we upskilled our 250 business leaders, including all the CEOs of our maisons and regions, with dedicated ESG trainings. We also rolled out a global training on the use of our new internal speak-up platform. As a next step, we will extend the platform to external stakeholders to allow them to voice their concerns and contribute to Richemont's ongoing commitment to transparency and ethical conduct. And now I hand back over to you, Jerome.

Thank you, Burkhard. Let me take you through some exciting elements happening this year with fashion and accessory. Indeed, this year fashion accessory rebounded, not only rebounding strongly, but has reached record high sales at this time. This growth trajectory has been further confirmed this year with new sales. voila, thank you, record for the category, posting solid growth and a profitable result for the first time since 2019. Looking at the F&M Maison individually, as I was at the opportunity to present you just before, we had notable performance this year, and I could say again this year. I spoke from Alaya and Peter Millier appointment, since the Peter Millier appointment as creative director in 21, It's amazing to see how Alaya is growing both in terms of sales but also in terms of disability, collection after collection. It has allowed Alaya now to expand its retail network with Alaya coming back to the US with a brand new shop in Soho neighborhood in New York. Chloé, as I said, is also in a positive dynamic since the appointment of its creative director in 2020, with new aesthetic across its product offering. And finally, Delvaux. It is enjoying a successful journey since its integration into the group. This year is the first full year, in fact, within Richemont, and it achieved a very sharp growth since that acquisition. It has been, it's remarkable, the positive reception of the latest collection have been remarkable. It's true for Tempête, that you mentioned, but also for Langoline, that has been introduced this year. For Delvaux, it's also an important year in terms of retail development, with a new shop in Dubai, or in Tokyo, Omotesando. Not to forget the very strong sales momentum at G4 and at Peter Miller. And in the case of G4, supported by an impressive growth with a blossoming expansion into Asia, notably South Korea. And as we said, Peter Miller is impressive by both its growth and size today. This success illustrates this Maison's remarkable journey, capitalizing on their heritage, craftsmanship, creativity, combined as well with infrastructure and backing of Richemont, our backbone. We'll continue to support all our Maisons to enable them to flourish. If you allow me, let's focus maybe on the reason behind the success. Let's say that the success of this year is the first result of an unrelenting focus of the group for five priorities across all the F&M maison. First, enhancing the desirability of our maison. Here, It's the creative directors of our maison that have been playing a remarkable role, and that creative capacity have been reinforced with the arrival of Peter Meunier at Alaia, Gabrielle Hurst at Chloé, or Marco Tomasetta at Montblanc. There were already talented creative framework in place at Delvaux, or at Peter Miller and G4, of course. The increased appeal of our F&M Maison has translated into higher traffic in our stores and our website. It increased our pricing power. The second big focus of the category has been on local clientele and that across all geographic. It is able us to manage the fluctuating trends at international level. They've been providing us as well a solid base for future growth. Delvaux has been a prime example of the success of this focus of the past year, consolidating a strong clientele base in South Korea and Japan, to major market for the maison. Third pillar, our increased ambition in leather goods, symbolized by the successful again integration of Delvaux, and accelerating building capacities across all maison, from the creative side, with product development, but also through the manufacturing. Fourth pillar of effort, of success, the promotion of the strong focus on direct-to-client engagement with two first elements. First, the upgrade of our retail network with strategic openings this year for Alaya in New York, Delvaux in Dubai and Tokyo. And also, not to forget, the new concept shop of Montblanc reopened in Champs-Élysées boutique in Paris. And second, there is the acceleration of our strategy to create the ultimate omni-channel experience with our colleague of Elena. Finally, our ability to excel in our operation in order to offer our clients the products they desire at the right place consistently. Over the past year, we have strengthened our teams across the whole organization, reinforced agility and flexibility in our operation and accelerated our time to market and manage our inventories effectively. We remain focused on these priorities It's just the start of the journey. We raise the bar for all of them and as we progress in our ambition to drive a sustainable and profitable growth in the category. Now a few more words to conclude before we move to the Q&A. Our strong operational and financial performance was alighted by sales reaching close to 20 billion euro with double digit increase in all business area. Operating profit reached 5 billion euros, a strong improvement in profitability with all business areas generating higher sales and profit. As a result, our cash flow from operating activities was solid at 4.5 billion euros. We have significantly advanced our journey in luxury new retail with the signing of an agreement last August with Farfetch and Hanaba. under which YNAB and our maison will adopt far-fetched platform solutions. The agreement is subject to a number of conditions, including the receipt of certain major control approvals. Closing is expected by the end of calendar 23. By elevating both our chief sustainable officer and our chief people officer and CEO of region to the senior executive committee, we have made an increased commitment to embedding ESG in our operation. We'll further strengthen our SG team at the Maison and at Responds, and we'll continue to step up our ambition as a group in this important area. We have a strong balance sheet, as Burkhard said, giving the group the flexibility and adaptability to nurture our Maison to reach their full potential in a sustainable and responsible manner. See the opportunity. as they may arise and also weather economic cycle while delivering attractive returns to our shoulder. We are confident both in our resilience and long-term prospects. Our Maisons are strong, well positioned to meet local demand and cater for future growth in tourism, including from a more significant reduction of travel by Chinese customers beyond neighboring markets. We have flexibility in our manufacturing facilities and newly added capacity at our jewelry maison. This give us the agility required to navigate today in uncertain macroeconomic government. We are well positioned to deliver profitable and responsible growth over time. And I would like to close this presentation by thanking all our colleagues for their commitment, creativity, and resourcefulness over what has been a remarkable year in a very volatile and uncertain environment. Together, we craft the future. And this concludes our presentation. We now open the floor to your questions. Thank you.

Okay. Thank you. Thank you, Jerome. So before you ask the questions, please clearly announce your name and company's name. So I saw Susanna, and I think it was Ashley. It's difficult because more or less everybody afterwards, yeah, it's Louise. And then we'll start with Jerome and so on because otherwise it will be too difficult. So please, Susanna, go ahead. And thereafter, Ashley.

Thank you for taking my question, Susanna Push from UBS. I have three. So first of all, maybe, would you be able to comment a little bit more about the performance by nationality or region? I guess just to give us a little bit of color around the Chinese consumer last quarter, because I presume they started to travel, so it would be interesting to know. Also the American cluster Europeans just broadly speaking to know how various clusters are performing even more travel. And also specifically it would be interesting to hear your thoughts about the Americans because as you've mentioned during the presentation there was some improvement last quarter versus Q3 which is a stark comparison to your peers. So I would imagine you're clearly doing better, the brands are doing better, you're more higher end position but just any thoughts on that would be very helpful.

Could we just stop there? That was just the one question. No, by the time you get to three, we're going to forget one. We'll give you two more. Sophie, she can have two more, but she will have one, and then two, and then three.

Okay. I promise the two other ones are very short.

Okay, then obviously other ones first.

Are they yes and no questions?

Well, the second one is kind of yes and no. Okay, what? Pricing. Okay, sorry, what?

Pardon me? Sorry, could we stop at one, then I'll give you two and three.

Okay, perfect.

Thank you. Well, I think we're all on to one. The general resumption of purchasing in the United States was quicker time-wise than in China. that China would take longer to open, which was contrary to the popular belief, was simply because we had more information and, I would say, better sources. Even highly informed Chinese friends and colleagues, and our partners at Alibaba, was surprised by the sudden lifting of the restrictions. And apparently this happened because a great number of football fans watched the World Cup and they heard crowds, but initially it was only focused on the players. And then when they started seeing local disturbances broke out and they left it. I actually told some Chinese friends that they would not be able to stop Omicron. They might as well use it to have a type of vaccination for the population because even as efficient as they are they wouldn't stop it. Remember it was first discovered in South Africa clinic in East London, so we had the data. So when I made that prediction, it would take longer. It was expected. So the next thing that we've seen, it was very traumatic. The Chinese saved an enormous amount of money during that period. It was a traumatic experience. It was a total lockdown. And their first expenditure was just human going out for dining, traveling. So it was more spent on services. Yes, we've seen individuals traveling. So individuals have come to Europe and Hong Kong and Macau, et cetera, but not the tourist groups. So yes, the expenditure is rising, but it is not risen as of yet, as it did in the United States. A little bit more caution, because even though they've spent a lot, they have not gone and crashed their credit cards. It's... It's important to note that their behavior has been more sober. But it's carrying on. Now, we know in terms of traveling, because of the pre-booking and the airlines and the hotels, that we shouldn't expect a lot of Chinese tourists to come in groups to Europe before the end of summer. That's just data driven. Now, in the United States, I'm always surprised that we as humans do not like to predict any discontinue. Things that get better, we always think they're going to get better, and that's why it got worse. We think they're always going to get worse and carry on. But in the history of what I've read about economics and finance, we've never had a sustained period of 5, 8, 10 years where the cost of capital was zero or close to zero. And this is bound to have an effect. You will recall in the past I've criticized the central banks and I've also said it's unfair and it would lead to social unrest. Now they contract it. But to move the funds rate by 500 basis points in a year, when all the liquidity entered the banking and non-banking, shadow banking business, and then to increase interest rates by that much, was really quite reckless. And of course, the first people that got caught were the bad executives who didn't learn banking 101, which is match your deposits with your liabilities. And this was exacerbated by the enormous liquidity that entered the system with lower economic, with lower borrowing demand. So what did these idiots do? bought long-dated bonds, long-dated securities. And even criminal was that the FDIC, the share price goes down by 60%. As my son said, you'd think that they'd go and pay them a visit. I'm in a major bank. I mean, if I had to be a regulator, I see the share price goes down by 60%. I would have been there. But the risk officer was working remotely. A big number of SVB senior executives were working remotely. Then they assumed moral risk by bailing them out. So now every depositor can go interest shopping with the hope that they'll be bailed out. But the FDIC was not constructed to bail out Harry and Meghan and Oprah Winfrey, who had $500 million with SVB. It was to protect smaller. So to answer America, do not look at Richemont or luxury goods. Look at the aim of the Federal Reserve Bank, which is to restrict, to bring down inflation. And for that, they'll have to restrict credit. The sadness is that the farmer in the Midwest who wants to borrow money for a tractor, he's going, or she is going to be affected. But there's already a contraction of credit. So the United States will not be as buoyant as a year ago. Will it return? Yes. Will it be soon? I actually think we're in for a harder landing than we hope for, because we do expect it. Will it affect us? Yes, it will affect everybody. However, we're lucky, as we've said a few years ago, we fly on five engines. One engine has a misfire. We've got four more engines. So at the time that it may slow down, China is picking up. When, for instance, the COVID restrictions really bit, we just redirected some of our high jewelry and stock to Japan, where it boomed. So one must anticipate these things. Will it be a boom year? I suspect that America started slowing down in November. And our results do not look, it says, Mr. Arnaud highlighted that Sephora did well. And they didn't speak about the rest too much. We've also had one maison that I'm not going to mention that had a very good first quarter. But generally we sense a slowdown in the United States. Is that a fair answer? Okay, and now the next two are binary questions, you said.

On pricing, that's a very simple one. Can you tell us, that's maybe for Burkhard or Cyril, Nicolas, what's been the pricing you've implemented in April, especially for Cartier and Van Cleef & Apples?

I will answer that one. Which is, they didn't increase prices by as much as I wanted them to. No, they felt... that one has to look over the medium to long term, and that we shouldn't be using shortages, et cetera, to raise prices. So we have generally not increased prices as much as our competitors. And Cartier, for instance, only took an increase in April. So don't look at Cartier and think price increases.

Sorry? Was it high single digits?

Yes. If I recall correctly, that is incorrect.

It's incorrect.

No, it is in the medium single figure. Okay, thank you.

And the last one, I hope you like that one because it's a bit more long term, not the classic short term questions we ask. So maybe if you could tell us a little bit more about what you're doing in production capacity, because we've seen in the slides you've been investing a little bit more, obviously demand is really strong, so it's a nice thing to see that you're seeing growth, you believe in in the long term as you're investing more. And last thing, Burkhard, I wanted to say we've noticed the special dividends for a second time in a row. Because I know last year no one noticed it, so I just wanted to say that's been appreciated.

Thank you. Apropos the special dividend, we look at our capital requirements over the next three to five years. And where we feel we have the capacity, we will return the capital, having, I promised 15% 10 years ago, and we're round about just above that . I didn't know how bad things were going to get. I should revise that somewhat. We're also getting another billion Swiss francs in November from the warrants. They've been very profitable for those who kept them, but we looked at that. So in order to pay the dividend, we have to look at our capital commitments and what we need to do. And remember the one thing none of you have written about it. is the bonds that we issued. It's 11 maturity, 11.2 years maturity, 1.3%. Because we suspected that the easy money would change sooner or later, that interest rates would go up. So we have that capital available as well. And it's really making sure that the next five to ten years, we got stress tested during COVID. We forget April three years ago, we lost €438 million in a month. One month. That's when Burkhardt and I stopped sleeping. Because me, immediately I extrapolated this by 12. You start getting panic stricken. Luckily, we actually came through. This company was stress tested. I really hope we do not go through that again. But it now makes me sleep a lot better to know that we had the resilience and the flexibility and that our colleagues, even though some had to be persuaded. Should I say, the Anglo-Saxon people took it quicker and more readily than the non-Anglo-Saxons in our company, but everybody got online. Special dividend is what it is. It's a special dividend. Thank you. And Burkhard. See why I said Michael is patient. There's a manufacturing capacity.

Absolutely. In manufacturing?

Yeah, when it comes to production and manufacturing, maybe today at Richemont, roughly more than every four person, every four colleagues is working in production and logistic. So it takes time to train. It takes time to develop capacity. so we keep investing in our capacity. Last year we said it was roughly 1,500 new colleagues that joined us in production. This year I was checking the statistic, we are exactly in the same volume number. And when it comes to facility, same story. We have two or three facilities opening on a yearly basis, mid-size, because we are not in mega factory. We are in mid-size factory. And this year will not be different. We'll have three to five new facilities that will open either in Switzerland or in close Europe between Italy, France, or Germany.

Maybe Cyril and I don't know if Nicolas want to comment further.

So you have been following us for quite some time. So you know from our fiscal 20, or basically Canada year 2019, how much we have grown, both Van Cleef and Cartier. And so this requires additional volumes, of course. So we have facilities. in France, in Italy, in Switzerland, and of course we had to expand. So we have just reopened a manufacturer in Torino, but of course this was in the making for three years. And the other one coming in Valencia was also prepared before. And we need this capacity extension. We also have a network of partner suppliers who are also encouraged to also invest. There is this very strong demand in Dewey, especially branded Dewey, and we expect this to continue to grow. So there is competition, but it's also a growing pie. So it requires additional capacity, basically, in all we control.

It actually leads the excess demand It's actually quite concerning at times, especially in watches, where the waiting list on some Lange's and some of the watches, Vacheron, some Cartier pieces, we have to close it for two years. And I constantly have to explain to, let's use Lange, that... In order to make some of the Lange watches, the ones, you know, the sports Odysseus, you must have been a lady or a gentleman, a watchmaker for at least 15 years, probably 18 years, they say 20 years, to be able to put this, to make this watch. Now 20 years ago, There were not too many young people queuing up to be watchmakers in Glashütte. And when we tell them it's actually limited by artisanal skills and hands and eyes, and please visit the factory before you're telling us we're creating artificial demand, then they get it. But there are some clients that already own 10, 15 million euros worth of watches that cannot understand it. So it's not creating artificial demand. I did tell them to calm down on the communication, though, because why do you communicate a watch that you can't get on a waiting list for? So we have to expand. But both in Katja and Van Cleef, it's also a question of a culture and a training. It's not just building a plot. So, for instance, Delver, we chose to go where there's a culture, where people already have the skills, which is one of the reasons why we're so strongly promoting Homo Faber. A lot of the great artisans of Europe have said to us their children are not really interested. And when you visit them, you find out they're great artisans, but they don't even understand the Internet. So they don't have a website. Clients cannot find them. Only, that's why when you go to Milan, our Milanese and Roman friends, they show us things that we didn't know existed. They don't go to Rodeo Drive or Bond Street or Champs-Élysées or Montenapolioni. They've got their own people. We, it's not just press a button and open a manufacturer. It's training. One of my big problems with work from home, which I'm going to have to address this afternoon with the town hall, I expect that it was my son's generation who'd all say, now I want to work from home stuff you. No. They are being deprived from learning from people who are 45-year-old plus. Now, why, if we hire a very talented 25-year-old man or woman, should we allow his or her boss to sit at home? When Karl Heinz's people go to work, the sales staff go, but us, who are really the overheads? I mean, if you're not in designing or manufacturing or selling, you're overheads. I mean, in reality. Okay? But we have this attitude, we'll work from home. How are you going to transmit the culture? So your question, that question is, I mean, we can build a plant, but who do we get inside? So there's an inelasticity which is not easily met. But, of course, it's very critical to us not to lose those skills. So you will see more of a vertical integration. That is your real answer.

Excellent. That's good to hear. You can give the microphone to Ashley.

Thank you. I'm Ashley Wallace from Bank of America. First of all, congratulations on an outstanding... We don't hear you so well.

Thank you.

I have two questions. My first question is on jewelry. Can you help us understand how you think about the midterm demand for jewelry in light of increased competition and how you plan to prioritize your investment in the brand as a result of that? And then my second question, if it's okay to ask now, is on specialty watchmakers. Saw a nice margin development this year, up to 19%, so I think the highest level in seven years. But it's still down from the peak of 27%, you know, a decade or so ago. I was wondering how we should think about the margin from here. Essentially, is there more room for improvement? And if so, ultimately, where does that come from?

Thank you, Ashley.

As I said before, there is a growing demand for Dewey and for the brand of Dewey overall. So as far as there is a growth in the world wealth, there is growth for luxury goods and there is increasing growth for Dewey. So even if there is more competition, there is much more demand. So there is room for many. And in terms of international brands in Dewey, there are very few, not so many. And so there is room for growth. So as far as if we believe that there is room for economic growth in the world, then there will be room for growth additional in brand and jewelry. So that's why we have to be ready for that, but knowing there's also high volatility, as Johan mentioned, and so we can't expect just linear growth. We have to be ready for cases where we can have contractions and cases where we have rebounds, as we have seen in the past 10 years.

I can only confirm I think as we know we repeat it very very often it's still a market where non-branded creations are dominant so there is still room to grow for brands and there are not new geographies but if I Thinking of an example like Thailand, for instance, which is a country with a very, very strong history of jewelry. It was a history of local jewelers and local designers. And in the last few years, we've seen that market really opening up quite strongly to international brands, Cartier, Van Cleef, others. And that's now becoming quite a significant market, which it wasn't for us even five or ten years ago. And we have many other examples like that. So we're quite confident that it will take time. It will take additional investments. There will be cycles, but there is still a lot of room for growth, yes.

Maybe when it comes to specialist watchmakers, just to keep in mind that in 2017, under the instruction of the chairman, they called for a big reset of the way we will be in capacity to develop our business in a more sustainable way, called True Demand. with a strict follow-up of what was the sell-out, what was the sell-in. In parallel, the Maison has been investing a lot of energy and time, both in focusing on innovating within the aircon and in quality. You saw the result. We had some difficulties while we had to readjust the model on the Trudemann. We absorbed, we buy back the stock years ago.

The result... Again, the human nature of over-extrapolating a threat. Watchers were doing that. So, we incentivized colleagues On that, never thinking the democracy riots would break out in Hong Kong. And this happened. You can tie it to, because it's the biggest watch market in the world, and like that, we found out excess watches, everybody Rolex. Initially, it was us and Rolex who really acted soberly and just cleaned it up. Now, we really monitor sell-in and sell-out.

And somehow in a year like this year, it was... very fragmented or had a lot of volatility in the heart of our clientele for the watches meaning here china you saw in the result or stress test and you saw through the covid as well that despite all that you had a leverage despite all that you see an increase of profitability showing in somehow if not the strength, at least already the sustainability of the model itself. But it's gradual, it takes time.

It's also the second hand watch market is, it needs to calm down. The Odysseus, when Will Allum and his colleagues came and presented that steel watch to me, and they wanted to sell it at 28,000 euro. I said, you're mad. It's too little. So we settled for 34. Four months later, somebody bought a watch at Rempe, and we had quite a discussion with them, put it up for sale at auction. It sold for 89,000. Then another, rather, a future non-Lange & Zoene approved client, So he's for 93,000. So now you would say, normal economics would say, move the price to 45,000, 50,000. But, you know, we look at the input and the costs and we, and that's a proportion early question, we think there's a fair price for a product. Because if you want your clients and their children to be your clients, then you treat people properly. And that also means that there's a residual value for their watches. But they don't buy, I mean, if you buy a new, think of Tesla. You go and buy a car for $60,000 or $20,000, and then Mr. Musk decides, no, I'll sell it for $12,000. What do you think the guy paid $16,000 feels like? Or the lady? So you've got to treat people long-term. So when you talk about margins on watches, it's not just let's take what we can get. It's building a long-term trust with the client, which really does play into the pricing decision. We have a situation where Cartier did a limited edition of the Pebble watch. 150 pieces. And on tomorrow, at the Phillips auction, watch number 71, which the lady must have designated the number, because she got her watch before I got my watch, having asked him, I asked him, please make this watch, 150. I buy full price, exactly the same as all of you, okay? So before number 150 gets, she's putting it up for auction tomorrow. So you can imagine a phone call that's a real cut when I got the Phillips catalog. But there's a craziness in the second hand watch market. And the speculation. Sorry.

Louisa, please go ahead.

Hi, how are you? Very well, thank you. Good morning. It's Louise Singlehurst from Goldman Sachs. Thank you for taking my questions. Just thinking about the longer-term trend, I wonder if we consider the jewellery maison over the past 10 years. I wonder if I can ask Mr Rupert in terms of how you did versus your longer-term plans back then. And if we look at the numbers, I mean, you've grown more than two, two and a half fold. Yes.

In 1976, we paid $7 million. We still had an argument, was it six or eight, but we settled on seven for 33% of Cartier-Mont. So it's been, I've said to a friend of mine, he and I have been together that years with his last three wives. And in the 80s, Cartier didn't do very well at all. So it's been up and down, but I would say surreal, what would you say, from about the noughties, 2000, a steady trend has happened. If you do things properly, and you carry on doing things properly, and then, one cliff. I suppose the question is... It meets your very lofty expectations.

And I don't want to over-extrapolate trends here as to your earlier comments, but in terms of the next 10 years, I mean, can it be done again?

Is it more of a demand or... Are women going to tell men, I don't want that? Please, you answer me.

I'll take that.

Okay. Sorry.

Okay.

We've just got to keep brand equity high. that a teenage daughter says to her dad, like a friend of mine in New York, when he bought her another brand, and the daughter said to him, what have I done wrong? Why did mentioning her friend, why did she get that? What have I done wrong? He called me, he said he bought shares immediately after that. It's Philippe. He said I had to go and buy shares in exchange. No, you've got to get brand equity and keep it going and keep desirability. You know, some years ago in a conversation, I said if we need to grow by, let's say, 15% per year, it means we need to grow our cash flow by 15% a year, which means we need, and in the end, we've got to grow our desirability by more than 15% per year and keeping the brand DNA pure. My nightmare is with... TikTok and social media, I see every ad. Lamp Iran, with our colleagues, I see every product. Balenciaga would never, ever have occurred at Richemont. And trust me, Bud Light would not have happened. It's not our role to be social adjudicators. We have colleagues, shareholders, commercial partners of all sexes, races, religious beliefs. As I said, I don't have a dog in that fight. We just want to have stayed true to the culture of Cartier, stayed true to the culture of Van Cleef, Lange, all of our products. And not get greedy. Don't go and pick low hanging fruit. Just grow within yourself and keep the brands equity, top of the mind. So in 10 years' time, yes, I expect Cartier and Van Cleef, and yes, and hopefully we'll have then Delver, Bucciarati, and grow them. We've been able to do it up to now. Van Cleef, we don't want to give you the figures. But Van Cleef's been a phenomenal success. We've seen first signs at Buccellati. We've seen signs at Delvaux. And they've mentioned all of the heroes, the designers. We've got a gentleman, Mossimo Giannulli, who is G4. He's a genius. He's an absolute genius. LA is his third business. They've moved G4. Now Scott Mahoney bought G4. I don't get the credit for that. It was a psychographic. I said to him I'll never wear that stuff. I mean those green, it's too young for me. Now it's the only shoes I'll wear because you can put them on. walk for 10 miles without getting blisters. He's a genius. But in Korea, they've moved him in the department stores from the sportswear to the luxury goods floor because his turnover and profit per square meter equals that of Chanel. It's not me. It's not any of us. It's a slightly crazy genius, lovely human being who lives in LA. Our luck was to get him as a partner. So don't believe all the stuff you hear. A fair measure of it is pure luck. No, but in order to have luck, you've got to believe in luck. You've got to be ready when the luck comes. So hopefully we'll continue. I think it was Mrs. Arpela who said, or Claude Arpela, Jacques Carpel has said, to be lucky, you've got to believe in luck. Correct? We, I have really, the positioning of Cartier and Van Cleef and Bucciarati, it's so clear. Chanel is clear. You look at the successful, it's a very clear position. And my colleagues have successfully managed to maintain that.

That gives us a very favourable look in terms of the growth outlook. I wonder if I can move to Burkhardt and just ask about the 35% margins. We're back to actually where we were, I think it was around 35% back in 2013, but obviously the business and door and maison has changed phenomenally in terms of scale and distribution channel. Over the next 10 years, obviously, very good growth prospects. Can we think that the margins, are they mid-30s? Is that now any reference? No, no, no.

He's prohibited from making the mistake that Yann Du Plessis made. Alan, when was that? Oh. Twenty-two years ago, Alan and I are sitting there, and the next moment, Jan de Plessis starts talking about the projected margins, and Alan and I, no.

I try. Okay. You know my answer, but I could say we're happy with where we are. As you can imagine. And the second answer would be ask me in 10 years. Yes. And then you get a concrete answer.

Thank you.

But you tried.

Patrick. Thank you. My first question on the growth watch. We have reached a new record level also because of the strong brand equity. What do you think here in the mid to long term? Is there any further improvement because of even strong brand equity and also scale effects? Or would you say you're now happy with this margin? That's my first question. Second question regarding the Chinese consumer. What was the exposure to the Chinese consumer before COVID, so including tourists? And what is it currently?

Obviously, we try to... of operating leverage. But you know, it's containing costs. And as we've said, if you look at the goodwill that we wrote off in the non-cash charges, you briefly referred to it, our online investment over 20 years was about 1.3 billion. That's the cost that we wrote off. But we've spent in capex in leases 5.4 point, what was it? 4.3. On the network, yeah. We want to Increase the asset turnover per boutique. I think that's the best way of describing online. When a customer, he or she, gets into a boutique, wherever we've done it successfully, the client conversion ratios jump through the roof. Also you move, your asset turnover will go up if you properly know exactly where all your stock is. So it's visibility, it's data. We will hopefully get there through better physical stock management based upon better data. Not only data looking back about where everything is, what is where, but also being able to predict where it will be needed. And none of you have asked about ChatGPT. And where will that fit in? Because trust me, if I were you, I'd seriously worry about chat GPT. It's going to affect a lot of people that don't quite expect it. Where will it fit into the far-fetched module? I was fortunate to meet Microsoft's head of quantum and That fell under him. He lives in Seattle. He's an Austrian who studied in Switzerland. Last September, they just tested it internally to see what are people going to use it for because they were worried. People were writing novels and people were writing poetry and it was love. It wasn't bad because we know it's going to get into bad ads. They released it December 100 million people. Today it's 200 million people. Now when you ask me how the tech advances, I cannot tell you except we'd better know how to use it when it appears. So in terms of what you're really asking is how can we continue to improve efficiency? Is that fair? Because that will increase the profit, the operating leverage. I wish I could answer you, except we answer ourselves every day.

But also brand equity, right?

Brand equity, today you go and ask chat GPT, what do you think of Cartier?

Patrick, let me just be specific. No guidance. And I'm just trying to explain why we also are... very reluctant to give guidance, even indications, right? And that is, if you look at the gross margin specifically, you mainly have, or basically have four elements in there, right, that influence the way the gross margin goes. Two are under our control, two are not under our control. So those that are not under our control is exchange rate and is, let's say, input prices, which is commodities, you know, gold, diamonds, whatever, and is labor, right? right, both have been volatile in availability and in pricing. So we don't, we cannot control that. And that has always been the case. And in recent times, if we think about the volatility of diamonds that we have, diamond pricing that we've had, or the availability of skilled labor, And it's not just bringing them in, but it's also upskilling them over very long periods of time.

Russia invades the Ukraine. 50% of our businesses, the pave, the small diamonds, come from Arosa. I'm saying at that time. We shut our businesses the morning of the invasion. We didn't wait four days for all the stock to clear. We shut it. We immediately said we're not buying diamonds from Arosa. Suddenly, I had some very interested colleagues. So we went to another major supplier immediately. Luckily, we had very good relationships with them. They rejigged their... business system to help us so we could act morally. Now, you tell me, please, what's going to happen in the next three years? And then we can have a long lunch and I can tell you what my answers may be with my colleagues. But every day, Burkhard, we speak obviously all the time. Who would have thought of COVID? would have thought of the Russian invasion of the Ukraine. We're just going to be flexible. And what I'm really happy about is we've got a team of people really working on our IT system now that will give us flexibility and speed and transparency. We can't promise you margins. But what I can promise you is the same questions you ask of us, we ask ourselves. It's better to be invested with people who worry all the time.

Okay. Okay. We do. Just to tie it up, the elements that we manage is our pricing, but within the limits of our fair pricing approach and policy, right? which is geared for the mid to long term stable client relationships and productivity in our operations. And that is what we worry about and that's what we focus on. So four elements, two are no control sort of, two are not. And that's why making lofty predictions one way or the other are difficult to uphold over time. Just the nature of the business.

Thank you. In regard to the Chinese consumers? Sorry? The Chinese consumers before COVID, what was the exposure roughly, including the tourists?

It's very difficult because we don't have Chinese consumers, Japanese consumers. We know where people buy. But if you say... ethnic Chinese people, a lot of ethnic Chinese people bought products in Paris. But it varies year by year. A very powerful percentage of our consumer, but let's say third, third, third, you know, I back Europe, the United States. That's been for the last 20 years. And then it changes.

I mean, pre-COVID, we all know the numbers. They're out there. Not ours, but let's say across the industry, we were talking about 33% to 36% more or less.

Please. Do not get this stuff because we don't know in a year's time.

No, that's what I'm saying, pre-COVID. You can back-solve when you look at our financial statements that our Chinese, and we call them residents now or by residency, were 24%. But that is a snapshot, let's say, in a balance sheet sort of approach where you look at a snapshot end of last fiscal year. Yeah, true. How it's going to play out, what the weight is going to be in a year's or in five years' time, I have no idea.

I have an idea. Countries that study STEM, science, technology, engineering, mathematics, and who don't spend all their time debating woke issues on campuses will be bigger buyers of our products in five to 10 years. My biggest fear is how will the West react to the inevitable growth of China. It's inevitable. The people are smart, they study like hell and they work like hell. This, by the way, I said 10 and 15 years ago. Those people tend to get richer. Okay, so expect them to get richer. And share that with us. Yes.

Patrick, if you can hand over to Edouard, thank you. And then afterwards, I think, Carol and Rogerio. And maybe we'll end afterwards.

Thanks. So you are Morgan Stanley, so thank you for taking my questions. So just sorry to follow up on the Chinese, China and Chinese nationals. It seems that so far this year, I mean year to date, calendar year, that the growth in terms of luxury spend is driven rather by high net worth individuals spending more rather than the middle class participating, so recruitment. Is that what you're observing so far? And also, if you could please tell us, you know, on a two-year basis, i.e. versus 21, are you seeing an acceleration in terms of the trend in April, May versus the first quarter of the calendar quarter of the year? Or are things more or less stable? Just qualitatively, I know you don't qualify things. The second question, I'll do them in order, but flagships. So, you know, you spend a lot of time talking about how you've renovated, invested in your network, and indeed the Rue de la Paix store, Cartier, is very impressive. But some of your friends and peers are investing also massively, and not just in hard luxury a few weeks ago, but also in soft luxury. In their flagship, they're putting restaurants, cafes, museums within the flagship. So do you think the bar has been raised in terms of flagship? And there might be an inflection point to expect from you guys, so that would be my second one. And then lastly, on M&A. Your balance sheet is indeed incredibly strong. Your return in capital to shareholders, you've announced that this morning, but obviously you have the balance sheet to make acquisition. I know no one knows what to expect over the long term, but what would you say is the probability that you make a material transaction over the next 12 to 24 months? And could it be in fashion that the goods, if that's the case? Thank you.

Okay, I came from M&A. I tend to find in my past that the companies are easy to buy. The companies that you buy, normally there's a reason why they're easy to buy. You always underestimate the difficulty of fixing it and the most difficult thing is inevitably the culture. That takes a lot longer than anything else. And we have been more successful in buying even smaller companies with great culture and then empowering them. If there's a financial meltdown, yes, maybe we'll look at bigger companies that are not performing because of exogenous factors, external factors. And yes, then we'll look. But at this stage, the terrible thing is the companies that are really nice are not for sale. And that's across the board. to get back your first question.

Sorry?

Yes, I tried to allude to that. Sorry, it was in the press this morning. I said the first sales here are happening, but it is wealthy. I wouldn't say high net worth. Wealthy individuals that are traveling. There are no big groups that we've seen or on the horizon. And so they've bought in China-related, in Singapore, in Macau, in China, Thailand.

China and Macau. Yeah, Macau. Macau.

Yeah.

China.

And starting in Singapore. Okay. It's initially been high net worth individuals, if you wish to call them. In terms, I am a skeptic about taking a Maison's name and getting into food and beverage. You cannot control the quality. You change the chef. And hotels. I owned a hotel. It was the most stupid thing I ever did in my life. They never call you and say they had a great time. But boy, let the chef be late or something, you get your... Leopard Creek. Southern Sun managed it. They didn't know that. But... Hotels are particular businesses that should be left to hoteliers. And the Belmont Group, I knew the previous owner, he was a genius. Okay? It's good. But for us to start hotels and restaurants, no. Uh-uh. We've got enough problems with our own dining facility here. These people eat the most incredibly boring food, the Swiss here. I mean, I... It's healthy. I know it's healthy, but... And we have good Cartier champagne, so... And we have good Cartier champagne, so... No, I know, but no, food and beverage, no. And yes, they're lifting the bar, But are we going to be opening restaurants and food and beverage at Cartier and Van Cleef? No.

And when it comes to flagship, see, we have renovated most of them. There are still some coming. But with the Rue de la Paix or Fifth Avenue in New York or Maison Chongdam in Seoul or Taipei 101, and they have been incredibly well received. So we don't believe that a luxury jewelry should become a department store. Some believe differently.

Don't go that far.

We think we have to be exclusive, yet inviting, and to make it as most beautiful as we can. And they have been very, very well received. So, I think we have done what was right for us.

Carol, yes, go ahead. Thank you. Hello, Carol Maggio from Barclays. Two questions, please. The first one on the jewelry segment. You mentioned that there is a bit more competition now on the sector, and I was wondering if you were also seeing that in terms of retaining talents. So do you see now a bit more war of competition to attract the talents and to keep them at the headquarters level, stores level, etc.? That's the first question. The second one was on the Chinese market and most of all on the island of Hainan, which you also just mentioned before, and which of course is becoming a bigger point of focus lately. Can you share a bit more insight on how you view this market? How big is your exposure in Hainan today on your key brands? And how many stores do you expect to open going forward? And last point on that, I think when we think of Hainan, there are still concerns about discounting grey markets or weaker infrastructure. So how do you tackle these challenges in order to avoid brand dilution?

I can try to answer on the first one. Yes, there is increased competition in jewelry, not so much because there are so many new brands. I think at the end of the day, if you think of major American brands, they've been there for a very, very long time. But, of course, now there is major reinvestment into them. And as it was mentioned several times, we are really working in activities where Building expertise, building culture takes a lot of time and probably more time than the pace of development of that market and that industry in the last few years. So that calls for, yes, competition over talents in the workshops, in head offices, in design studios, everywhere. which is healthy to some extent, and then it forces all of us to be more attractive and to find the ways to better train, better retain, better motivate our teams across the board. And this is probably something that we're going to see for some time because, once again, it will take years to really train the next generations of craftsmen, the next generations of designers, and this is going to be the case, and we deal with it.

And so the world of luxury is a rather close world where everyone knows everyone. But if we see also the balance of who we have attracted and who has been taken or wanted to have a follow-up in the career, it's quite balanced. So we don't see that there is a kind of a specific part of imbalance in this kind of talent questions and retention, but also recruitment, training, development. I think we need talent and we recruit them. And some of our colleagues also sometimes prefer to take different direction to their career. And as far as things are as they are now, it's quite fine. But we have to try and develop. Cartier has been for the 20 years a kind of school where many of the jury maison have people coming from Cartier to point over there. And you can look in the profession, those who at some point were either here or in Van Cleef, you know, we can see it's been there for quite some time. So it's not so different now than before because as Nicolas said, basically, it's the same brands. They just have changed hands.

Okay. The summary is we have a product committee meeting. And so in Katia they'll come regularly, Van Cleef, everybody, and we'll meet. New products and new campaigns, it's now been going for decades. Whenever anything goes off code, and we know Before Surreal there were quite a few that don't sell. Now how do we know it's off-code? Because you look at it. But then the clients look at it and they see this is off-code and then they don't buy it. Now I don't care if you've got a trillion dollars. If you try to imitate that code, the clients are too sophisticated. So when you look at Van Cleef, you know it's Van Cleef. Other people have copied the Alhambra. They try and copy Cartier, the clients know. So the strongest protection against people, I don't care how much money and I don't care the sizes of their buildings, is that we stick to our DNA and our codes. Because if we sit there, Cyril and Nicolas, and we know it's slightly off-code, the client's sure as hell are gonna know it. And that's our protection. And it's very difficult, we've tried it, to buy something that is at the lower price category and in the lower category. and to lift it up. It's easier to buy a Buccellati and democratize it by making it more accessible than it is to do the reverse. We'll just stick to our knitting. No restaurants.

And then if I may, on Hainan.

Just on Ainan, first, the number of visitors of Ainan for this year and last year, since the reopening is expected this year to be something like 87 million, it's three to four times Dubai. You know it well. So it's an important place for tourists, shopping, like many others. There our maison are present with our local partner. As you know well as well, you cannot operate directly there. It's not what it used to be, still today, which is fine. And it represents a fraction of our business in China. And you know as well, there is a big characteristic of Richemont is that our products is numbers. So we can follow our products and we can ensure then that their distribution is done in a qualitative way. So no concern in terms of exposure because it's a fraction of China, of the rest of China, let's say it like that. And nice recovery. Will it be as big as it used to be a couple of months ago or a quarter ago? Let's see. And you know well as well that Hainan is set to be a more and more resort, business, shopping practice, regular or standard business practice. So nice to have, nothing to worry.

Thank you. Thank you, and Rogerio.

Thanks for taking my question. I have one follow-up on the mix dynamics and a follow-up on watches. I think you've mentioned that you have been less aggressive on pricing than competitors, so out of the balance of the very strong growth in the last three years, the last 12 months, how mix has contributed to growth? given the success of iconic models and the brand equity getting stronger and stronger. So just interested to see how average selling prices are moving. And then on watches, as China recovers, the U.S. slows, and the European and Japanese markets seem to be holding up well. Have you seen any divergence in terms of category trends, with watches being a little bit more exposed to wholesale and the pre-owned market, as you've mentioned, cooling a little bit, slowing? I appreciate watches are much more GTC and much more geographic balanced than before. Thank you.

That's your category, Sarah.

Yeah, I can start. I can start by what she said. Thank you for your questions. It's indeed a very interesting one. And in the lines as well, what was said by the chairman as well before with the change of business model during the last 10 years and accelerated during the last five. So indeed, the Maisons are being more and more operating either in their own shop and you have seen 56% for specialist watchmakers, always our partner. Because ultimately, working with good partners all over the world has been behind the development of our maison for centuries. And if you take the external boutique plus our internal boutique, you have already more than three quarters of our total sales. So that capability of developing qualitative, in time, for a long time relationship, has been changing our business approach. Therefore, much less exposing us, not only to wholesale, I would say to stock of wholesale, if I may. Because the biggest exposure in this case is not so much that you work with a partner, but that between you and your partners somewhere, there is an imbalance between what you sell him and what he sells out, and then when it reduce speed, you don't have a factor of one to one in effect, but a one to ten. And the stress test that we've been through during the last three years, have been showing us that organizing our model around true demand was an absolute necessity, if not the only solution. So for the time being, again, it's not a wholesale exposure that will cause a breakdown of the model. And again, as the chairman was saying, Watches, before it was more for the jeweler and the five engine, while our watch business was powered by one and a half engine, now the watches are also powered by five engine.

I also think that we had a change of strategy stroke philosophy, whereas some of our major... Maisons would launch a new type of watch like every three to five years and massively push that. Whilst the previous massive boost still had stock in Ulster, guess what happens? make your own products obsolete by making this new one the watch to have. So we stopped that and said no, you must concentrate more on classic watches that will not No planned obsolescence anymore. If you look at Audi, Audi resale values, you can't really see when an Audi was made. Porsche 911. You've got to be like Frank Vivio, who's a lunatic, to say that's a 1967 or 1994, but then he doesn't know how many liters is in each car, which was quite astonishing. I mean, I asked him the size of his engine, and don't ask somebody if you don't already know the question. But some people have managed to contemporize without... Take an Audi A8 versus a Maybach. Who the hell wants to be seen in a Maybach? Or a Rolls-Royce Cullinan. It's got to be... Audi, you don't quite know 86, 88, et cetera, and they don't radically change. So there's a residual value to the cars. If you change all the time, you buy something for your daughter, your wife, yourself, and three years later they say, oh, you've got last year's model or three years ago's model. So look at, for instance, to give an example, the IWC pilots. My hero was Günter Blumlein, the man who really built. Genius. And there was an IWC pilot's watch still made by him that I spotted that came up for sale. And I bought it. And I wear it. And IWC watch people would say, oh, that's interesting. They're going to look at it. They didn't know it was done in 1991. But it was recognizable as an IWC pilot watch. So if you look at IWC pilot watches. If it's two years ago's model, the retailer doesn't have to go and discount it at 40% because there's still a demand. So it's an art. So when you ask about gray markets, what you asked earlier on the watch market, we would design a new watch, pump it, push it, Reward the people for selling it in, incentivize them. Now it's a lot different. And we want to be able to have that residual value with the client. So you won't see a huge launch and then typing down. It's with a big basic philosophy behind it. It's a different philosophy. And by the way, as much as we try to add value here, our bestsellers were done 30, 40 years ago and we've just tuned them. The tank, the love bracelet, Alhambra. And it's very difficult to tell creative people. There was a famous German architect who said, the best is always simple. But simple is not always the best. It's hard to tell creative people, do not try to be too creative because you're going to jump off best. Well, Nicola, I mean, especially you, Cyril, to have to tell them, listen, just remember this is Louis Cartier. That's where we have previous management, current management, and hopefully future management and we interact to keep that corporate memory and and dna because that's what the clients want and on the other question and you mix volume pricing

Yes, no, when I'm mentioning mix on the commercial margin, I think that you have different type of mix. You have the mix between categories. And if I speak for Bonclair, for instance, this has remained quite stable. Basically, the growth that we've seen or the development that we've seen have been in the different categories from high jewelry to more daywear jewelry and watches. It's more the mix by network that has slightly evolved, where Even though we are a retail company, we also operate some external stores where basically the sales are wholesale sales at wholesale price. And that channel has not increased at the same pace as internal retail or online sales. So the respective weight of full price retail sales is higher. So this is where you have a mixed effect as far as we are concerned.

What's in our case, we have three components. Of course, increase in volumes, but the increase in value has been stronger, meaning there have been higher increase for higher price point. And not only for high jewelry. For instance, on watches, we have a very high demand for gold on gold panther, for instance. We have difficulty to supply. So it's shifting the average price point higher. And basically, in all regions, And then, of course, price increases also added. But this part is the minor part. I'm saying higher average price point and top a little bit of price increase. But I say the price increase was mostly to carry on for the inflation that came from gold, from diamond, from Swiss franc that we had to take over. And taking into account also currency fluctuation that last year was very strong. So we could not increase at some moment in dollar or maybe because very high. And things shifted again so we could rebalance in a different way.

It's already 11.31, so I don't know whether you want us to take questions online. A lot of them have been answered already. Maybe a very short one, a quick one to answer relating to the ANP rate. Why the 20 basis points reduction from 9.9% represented to 9.7? I don't know, Burkhardt, if you want to reply to that one. And then there's another one. It's on the communications rate.

I can answer that. It's a very quick answer. Don't read anything into it. I mean, 19% sales growth, 17% A&P growth. It's close to 300 million additional communications spent compared to the prior year. Don't read anything into it. No shift in strategy whatsoever behind it.

I shift. Okay, you Germans, okay.

I should draw it out more, yes. I should draw it out more, yes.

And then we have a question on F&A Maisons. Whether the groups, F&A Maisons, are benefiting from the quiet luxury trends?

Quiet luxury we've been preaching for five years. You have all heard that we say less bling. The only example. Yes, quiet luxury. We believe in its style, not fashion.

So I guess this concludes today's presentation. Thank you very much for your participation. And for those of you here, please join us upstairs for some refreshment.

You know, those of you who've been here long enough, when Joe Kanui was chairman, he hated... meeting with anybody, an analyst, because he had a particular difficulty in pronouncing focus. Then for half an hour before, you'd practice focus, and then he'd get here and start, every now and again there'd be a line, we have to focus, and so it goes. Any case, bless you so. Thank you all for coming. Thank you.

Thank you.