HERMÈS - 2020 Universal registration document

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PRESENTATION OF THE GROUP AND ITS RESULTS COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS

The platform continues to evolve technically in order to constantly improve the services offered online. The latest innovations include a new purchase checkout procedure, increased security for remote payments, new presentation pages for the Apple Watch Hermès and for belts, or the possibility (in France and Germany) to personalise scarves and certain small leather goods.

The development of this digital flagship also meets Hermès’ ambition to offer omnichannel sales pathways. For example, it is now possible to display online products offered in stores closest to home thanks to the Product Locator rolled out in 116 stores. Desired items can also be reserved and then collected in-store, with the eReservation facility offered in 16 stores. These new services have made it possible to better support customers in the unprecedented context of the health crisis, and represented a significant means of directing traffic to the stores concerned.

COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS

1.8 AFR

INCOME STATEMENT

1.8.1

2020

2019

In millions of euros

Revenue

6,389.4 (2,013.3) 4,376.2 (1,698.5) (696.2) 1,981.4

6,883.4 (2,124.9) 4,758.5 (1,815.7) (604.0) 2,338.9

Cost of sales Gross margin

Sales and administrative expenses

Other income and expenses Recurring operating income

Other non-recurring income and expenses

91.1

-

Operating income Net financial income Net income before tax

2,072.5

2,338.9

(86.1)

(68.6)

1,986.4 (613.0)

2,270.3 (751.0)

Income tax

Net income from associates CONSOLIDATED NET INCOME

16.1

15.9

1,389.6

1,535.3

Non-controlling interests

(4.1)

(7.0)

NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

1,385.4

1,528.2

Recurring operating income amounted to €1,981 million, compared with €2,339 million in 2019, a decline of 15%. Cost control and agility in inventory management kept recurring operating profitability at a high level, i.e. 31% for the full year (34% in 2019). After taking into account a non-recurring profit of €91 million related to the deconsolidation of Shang Xia, operating income amounted to €2,073 million, or 32.4% of sales. Net financial income, which includes interests on lease liabilities, financial income from cash investments and the expense relating to foreign exchange hedges, represented a net expense of €86 million, compared with €69 million in 2019. The income tax rate amounted to 30.9%, a decrease of 2.2 points compared to 2019, mainly due to the non-taxation of Shang Xia’s deconsolidation proceeds and a favourable geographical mix. After taking into account the net income from associates (income of €16 million) and non-controlling interests, the consolidated net income attributable to owners of the parent amounted to €1,385 million compared with €1,528 million in 2019, i.e. a decrease limited to 9%.

In 2020, the Group’s consolidated revenue amounted to €6,389 million, a decrease limited to 6.0% at constant exchange rates and 7.2% at current exchange rates. The gross margin rate reached 68.5%, down by 0.6 points compared to 2019. This slight decrease was due to the under-absorption of production costs in the first half of the year, despite the favourable impact of currency hedges. Sales and administrative expenses, which represented €1,699 million versus €1,816 million in 2019, include in particular €279 million in communication expenditure compared with €357 million in 2019, after the postponement or cancellation of numerous events due to the health crisis. Other income and expenses amounted to €696 million, compared with €604 million in 2019. They include depreciation and amortisation of €468 million (€407 million in 2019), half of which relates to property, plant and equipment and intangible assets and the other half to rights-of-use. The increase compared to 2019 reflects the continuation of investment projects in the distribution network, digital and information systems. Other expenses also include €118 million related to free share plans and the donation of €20 million to AP-HP (the Parisian public hospital system).

38 2020 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL