HERMES_REGISTRATION_DOCUMENT_2017

4

COMMENTS ON THE FINANCIAL YEAR AND OUTLOOK

CREATION OF VALUE

CREATION OF VALUE

4.3

The notions of economic value added (EVA) and return on capital employed (ROCE) were implemented within the Hermès Group several years ago as performance indicators for the Group’s investments.

2017

2016

In millions of euros

Recurring operating income

1,922.0

1,696.5

Group tax rate

35.4%

33.7%

Recurring operating income, after tax (I) Capital employed at the end of the period 1 Average capital employed over the period (II) 2

1,241.3 2,091.8 2,171.8

1,125.0 2,251.8 2,284.1

Weighted average cost of capital (III)

7.88%

7.71% 948.9

Economic value added (EVA) = (I) – (II) x (III) Return on capital employed (ROCE) = (I) ÷ (II)

1,070.2

57%

49%

(1) Corresponds to the sum of non-financial assets and working capital requirements as at 31 December. The reconciliation of this indicator with the Group’s statement of financial position is as follows:

2017

2016

In millions of euros

Statement of financial position-assets

6,768.2 (270.9) (2,931.9) 3,565.4 6,768.2 (5,045.5)

5,998.7

Financial assets

(31.9)

s

s Cash and cash equivalents

(2,328.9) 3,637.8 5,998.7 (4,384.8)

Subtotal I

Statement of financial position-liabilities

Equity

s

s Borrowings and financial liabilities

(53.7)

(41.0)

s Provisions and non-current post-employment and other employee benefit obligations

(195.4) 1,473.7 2,091.8

(186.8) 1,386.0 2,251.8

Subtotal II

CAPITAL EMPLOYED AT THE END OF THE PERIOD (I-II)

(2) Corresponds to the average capital employed at the end of the period n and n-1.

The economic value added (€1,070 million in 2017, versus €949 million in 2016) increased by 13% driven by growth and the favourable changes in working capital requirements. The return on capital employed reached its highest historical level in 2017 at 57%, versus 49% the previous year.

EXCEPTIONAL EVENTS

4.4

No exceptional events occurred in 2017.

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2017 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL