Compagnie Financière Tradition S.A.

Ladies and gentlemen, welcome to the Richemont for Year 24 interim results presentation. I am Alice, your call operator. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Sophie Cagnard, Group Corporate Communications and IR Director. Please go ahead.

Thank you, Alice, and good morning, everyone. Thank you for joining us for Richemont's half-year results presentation for the period ended 30 September 2023. Today, Johan Ruppert, Chairman, Jérôme Lambert, Group Chief Executive Officer, Burkhard Grund, Group Chief Finance Officer, Cyril Vigneron, Quartier Chief Executive Officer, and James Fraser, Investor Relations Executive. We would like to remind you that the company announcement and results presentation can be downloaded from richemont.com. and that the replay of his audio webcast will be available on our website today at 3 p.m. Geneva time. Before we begin, please take note of our disclaimer regarding forward-looking statements in our ad hoc announcement and on slide two of our presentation. Turning now to the presentation, the workout will begin by discussing key highlights and group sales. I will then provide further detail on the performance of our maisons. Finally, Burkhardt will take you through the financials and offer some concluding remarks. This presentation will then be followed by a Q&A session. Burkhardt, over to you.

Thank you, Sophie. Good morning to everyone listening and thank you for joining us today. During the first half of the year, we faced growing headwinds, including an uncertain macroeconomic and political environment, unfavorable foreign currency movements and demanding comparatives. nonetheless achieved double-digit sales growth for the six-month period ended September 2023 for our continuing operations, with an increase of 12% at constant exchange rates and 6% at actual exchange rates. Operating profit of 2.7 billion euros was 2% lower over the prior year period, leading to an operating margin of 26%, a 210 basis points reduction compared with a year ago. Excluding the significant negative foreign currency impact, both operating profit and the resulting operating margin rose at constant exchange rates, as we will see on the next slide. Profit from continuing operations at 2.2 billion euros was 3% higher than in the prior year period. Cash flow from operating activities remained solid at 1.7 billion euros. Our net cash position was strong at 5.8 billion euros, taking into consideration the recent 2.1 billion euro dividend cash payment that was approved by shareholders at the 2023 AGM in September. Please remember that our net cash position excludes 0.7 billion euros of YNAB's net overdraft classified as liabilities held for sale. The double-digit half-year sales increase at constant exchange rates reflected a very strong first quarter and softer second quarter, up 5% at constant exchange rates, highlighting the resilience of our maisons in a challenging environment. Q2 sales were impacted by organic growth softening to high single-digit in Asia-Pacific and decreasing by 1% in Europe. At actual exchange rates, the second quarter sales were down 2%. Half-year sales growth was led by the jewelry maisons and the retail channel. The strongest regional growth was in Asia Pacific, fueled by the removal of COVID-related restrictions at the start of the year and the related resumption of travel by the Chinese clientele. Unfavorable foreign currency movements have also adversely impacted the gross and operating margins. The reported gross margin was 68.2% compared to the 69.9 margin at constant exchange rates. Operating profit from continuing operations of 2.7 billion euros was 2% down at actual exchange rates, but 15% up at constant exchange rates. At constant exchange rates, the operating margin rose by circa 90 basis points to 28.5% compared to the prior year period. Julien Maison showed their continued leadership in the industry during the period, increasing sales by double digits and recording a strong operating margin of 35.5%. During the period, Richemont strengthened its corporate governance with the appointment of two new board members, Fiona Druckenmiller and Ban Schott, as well as two new SEC members, Bud Brinkrewe and Sven Grundmann. It also released its ESG report in accordance with GRI standards. Let me now discuss the group sales performance in more detail, first by region and then by distribution channel. Unless otherwise stated, all comments refer to year-on-year changes at constant exchange rates. All regions posted growth with varied strength, led by Asia-Pacific, where sales increased by 23%, making this region the largest contributor to the group sales increase. Sales softened to high single digits in the second quarter on the back of less favorable comparatives. The half-year regional performance was driven by a 34% sales increase in mainland China, Hong Kong and Macau combined, following the removal of COVID-related restrictions at the beginning of the year, increasing travel flows across these three markets, combined with favorable comparatives. Locations in the region that also showed strong growth included Taiwan, Thailand, and Australia, while other locations had varied and somewhat more muted performances. Overall, Asia-Pacific represented our largest region, with 42% of group sales, up from 39% in the first half of last year. European sales increased by mid-single digits, driven by the resilience of domestic demand and tourist spending, largely from American, Middle Eastern, and more recently, Chinese clients. During the second quarter, sales were broadly flat, reflecting lower spend from the American Middle Eastern clientele. Sales in Europe represented 22% of group sales in line with H1 of 2023. Notable regional performances came from France, Italy, and Switzerland. Sales in the Americas were softer at reported rates and broadly in line with the prior year period at constant exchange rates on demanding comparatives, with an improvement during the second quarter. Americans continue to spend abroad, mostly in Europe, though to a lesser extent than in the prior year period, partly due to the weakening of the US dollar-euro exchange rate, which was at parity a year ago. America has made up 21% of group sales, almost on par with Europe. Strong growth continued in Japan and the Middle East and Africa, sustained by the strength of tourism in Japan, particularly from the Chinese clientele, and good support from both domestic and tourist spending in the Middle East and Africa. Combined, these two regions comprise 15% of group sales, broadly in line with the prior year period. Let us now turn to sales by clientele in the directly operated stores of most of our maisons. This will give you an indication of the magnitude of sales growth. Starting with the mainland Chinese clientele, you can see demand was strong in the first half of the year, with sales up by circa 50% over the prior year period and about 22% and 48% on a two and four year comparison basis. In short, sales with the mainland Chinese clientele are well above the pre-COVID levels. There was softer demand from the American clientele in this first half with sales up around 3%, recording nonetheless very strong rates on a two and four year stack of around plus 40 and plus 140% respectively. The European clientele proved resilient with sales rising by about 8% of the prior year period and up almost 50% and 120% on a two and four year comparison basis. Note that the overwhelming majority of the spend by Europeans was domestic. The share of tourism related sales has nonetheless continued to increase, reaching now approximately one quarter of group sales, driven by the resumption of Chinese spend outside mainland China, with most purchases being made within Asia. Let us now turn to sales by distribution channel. Retail sales represented 69% of group sales, a 200 basis point increase over the prior year period. Retail enjoyed the largest increase among the distribution channels at plus 16%, with double digit increases at the duit maisons and the specialist watchmakers and growth in all regions. Sales benefited from a net increase of 27 store openings overall, most notably in Asia Pacific and the Americas, including the Nubuchelati store in Macao and the Panerai store in Seoul. Online retail sales at 5% of group sales were 2% lower versus the prior year period. Performance varied by region, with higher sales in the Americas and the Middle East and Africa, and by business area, with moderate growth at the jewelry maisons and fashion and accessories maisons. Now moving to wholesale sales, which include sales to monobrand franchise partners and third-party multi-brand retail partners, sales to agents, and royalty income. Sales on the channel represented 26% of group sales compared to 27% a year ago. Wholesale sales increased by 5%, led by double-digit progression at the jewelry maisons and lower performance elsewhere. Sales growth was primarily driven by Asia Pacific and Japan. Direct-to-client sales, which represent sales in our directly operated stores and online retail sales, make up 74.1% of group sales, representing a 120 basis point increase over the same period a year ago. This increase reflected the strength of the retail channel overall and the continued retailization of the specialist watchmakers, where the direct-to-client sales rose by 500 basis points to 59%. Nonetheless, the jewellery maisons continued to post the highest DTC rate at 82%. Over to you, Sophie.