translation of the french interim financial ......statement by the company officer responsible for...
TRANSCRIPT
TRANSLATION OF THE FRENCHINTERIM FINANCIAL REPORT
SIX-MONTH PERIOD ENDED JUNE 30, 2019
CONTENTS
EXECUTIVE AND SUPERVISORY BODIES; STATUTORY AUDITORS AS OF JUNE 30, 2019 1FINANCIAL HIGHLIGHTS 2HIGHLIGHTS 4SHARE CAPITAL AND VOTING RIGHTS 4
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP 5
COMMENTS ON THE CONSOLIDATED INCOME STATEMENT 6WINES & SPIRITS 10FASHION & LEATHER GOODS 11PERFUMES & COSMETICS 13WATCHES & JEWELRY 14SELECTIVE RETAILING 15COMMENTS ON THE CONSOLIDATED BALANCE SHEET 16COMMENTS ON THE CONSOLIDATED CASH FLOW STATEMENT 18
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 21
CONSOLIDATED INCOME STATEMENT 22CONSOLIDATED STATEMENT OF COMPREHENSIVE GAINS AND LOSSES 23CONSOLIDATED BALANCE SHEET 24CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 25CONSOLIDATED CASH FLOW STATEMENT 26SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 27
STATUTORY AUDITORS’ REVIEW REPORT ON THE HALF-YEARLY FINANCIAL INFORMATION 58
STATEMENT BY THE COMPANY OFFICER RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT 59
This document is a free translation into English of the original French “Rapport financier semestriel”, hereafter referred to as the “Interim Financial Report”. It is not a binding document. In the event of a conflict in interpretation, reference shouldbe made to the French version, which is the authentic text.
(a) Independent Director.
Board of Directors
Bernard ArnaultChairman and Chief Executive Officer
Antonio BelloniGroup Managing Director
Antoine Arnault
Delphine Arnault
Nicolas Bazire
Sophie Chassat (a)
Charles de Croisset (a)
Diego Della Valle (a)
Clara Gaymard(a)
Iris Knobloch (a)
Marie-Josée Kravis (a)
Lord Powell of Bayswater
Marie-Laure Sauty de Chalon(a)
Yves-Thibault de Silguy(a)
Hubert Védrine(a)
Advisory Board members
Yann Arthus-Bertrand
Paolo Bulgari
Executive Committee
Bernard ArnaultChairman and Chief Executive Officer
Antonio BelloniGroup Managing Director
Delphine ArnaultLouis Vuitton Products
Nicolas BazireDevelopment and Acquisitions
Pietro BeccariChristian Dior Couture
Michael BurkeLouis Vuitton
Chantal GaemperleHuman Resources and Synergies
Jean-Jacques GuionyFinance
Christopher de LapuenteSephora and Beauty
Philippe SchausWines & Spirits
Sidney ToledanoFashion Group
Jean-Baptiste VoisinStrategy
General Secretary
Marc-Antoine Jamet
Performance Audit Committee
Yves-Thibault de Silguy(a)
Chairman
Antoine Arnault
Charles de Croisset (a)
Nominations and Compensation Committee
Charles de Croisset (a)
Chairman
Marie-Josée Kravis (a)
Yves-Thibault de Silguy(a)
Ethics and Sustainable Development Committee
Yves-Thibault de Silguy(a)
Chairman
Delphine Arnault
Marie-Laure Sauty de Chalon(a)
Hubert Védrine(a)
Statutory Auditors
ERNST & YOUNG Auditrepresented by Gilles Cohen and Patrick Vincent-Genod
MAZARSrepresented by Isabelle Sapet and Loïc Wallaert
EXECUTIVE AND SUPERVISORY BODIES; STATUTORY AUDITORS AS OF JUNE 30, 2019
1Interim Financial Report - Six-month period ended June 30, 2019
FINANCIAL HIGHLIGHTS
2 Interim Financial Report - Six-month period ended June 30, 2019
Revenue(EUR millions) Change in revenue by business group June 30, 2019 June 30, 2018 Change
(EUR millions and percentage) Published Organic(a)
Wines & Spirits 2,486 2,271 +9% +6%Fashion & Leather Goods 10,425 8,594 +21% +18%Perfumes & Cosmetics 3,236 2,877 +12% +9%Watches & Jewelry 2,135 1,978 +8% +4%Selective Retailing 7,098 6,325 +12% +8%Other activities and eliminations (298) (295) - -
Total 25,082 21,750 +15% +12%
(a) On a constant consolidation scope and currency basis. The net impact of exchange rate fluctuations on Group revenue was +3%and the net impact of changes in the scope of consolidation was nil. The principles used to determine the net impact of exchangerate fluctuations on the revenue of entities reporting in foreign currencies and the net impact of changes in the scope ofconsolidation are described on page 9.
Profit from recurring operations by business group June 30, Dec. 31, June 30, (EUR millions) 2019 2018(1) 2018(1)
Wines & Spirits 772 1,629 726 Fashion & Leather Goods 3,248 5,943 2,775 Perfumes & Cosmetics 387 676 364 Watches & Jewelry 357 703 342 Selective Retailing 714 1,382 612 Other activities and eliminations (183) (330) (171)
Total 5,295 10,003 4,648
11%Other markets
17%Europe (excl. France)
23%United States
Asia (excl. Japan) 33%
Japan 7%
France 9% 21%Euro
29%US dollar
Japanese yen 7%
Other currencies 37%
Hong Kong dollar 6%
Revenue by invoicing currency
42,63646,826
25,082
2017 2018 2019
19,714 21,750
As of June 30
Profit from recurringoperations(EUR millions)
8,29310,003
5,295
2017 (1) 2018 (1) 2019
3,6404,648
As of June 30
Stores(number)
Stores by geographic region(number as of June 30, 2019)
4,4164,592
06/30/1912/31/1806/30/18
4,699
792United States
522France
1,163Europe (a)
461Other markets
(a) Excluding France. (b) Excluding Japan.
1,341Asia (b)
420Japan
Revenue by geographic region of delivery
3Interim Financial Report - Six-month period ended June 30, 2019
Net profit(EUR millions)
3,6053,292
6,990
06/30/18 (1) 06/30/1912/31/18 (1)
Net profit, Group share(EUR millions)
3,004 3,268
6,354
06/30/1906/30/18 (1) 12/31/18 (1)
5.97
12.64
6.49
06/30/1906/30/18 (1) 12/31/18 (1)
2017 2018 2019
5.006.00
2.20 (b)
1.602.00
Interim
7,3595,487 (b)
8,684
06/30/1906/30/18 (1) 12/31/18 (1)
35,39031,482 33,957
16.2%24.5%23.4%
06/30/1906/30/18 (1) 12/31/18 (1)
3,161
8,490
4,189
06/30/1906/30/18 (1) 12/31/18 (1)
Operating investments(EUR millions)
1,4231,204
3,038
06/30/18 06/30/1912/31/18
1,957
5,452
1,695
06/30/1906/30/18 (1) 12/31/18 (1)
(a) Gross amount paid for fiscal year,excluding the impact of tax regulationsapplicable to the recipient.
(b) Payable on December 10, 2019.
(a) In 2018, excluding the acquisition ofBelmond shares. See Note 18.1 to the 2018 consolidated financial statements.
(a) Excluding “Lease liabilities” and “Purchasecommitments for minority interests”. See Note 19.1to the condensed consolidated financial statements for definition of net financial debt.
(b) Excluding the acquisition of Belmond shares. See Note 18.1 to the 2018 consolidated financialstatements.
(1) The 2017 and 2018 financial statements have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 to the condensed consolidated financial statementsregarding the impact of the application of IFRS 16.
(a) See the consolidated cash flowstatement on p. 26 for the definition of operating free cash flow.
Dividend per share (a)
(EUR)
Net cash from operating activities(EUR millions)
Net financial debt (a)
(EUR millions)
Equity and Net financialdebt/Equity ratio (a)
(EUR millions and percentage)
Operating free cash flow (a)
(EUR millions)
Basic Group share of netearnings per share(EUR)
SHARE CAPITAL AND VOTING RIGHTS
Number Number of % of capital % of voting of shares voting rights(a) rights
Arnault Family Group 238,393,953 465,628,350 47.17% 63.32%Other 267,037,332 269,767,103 52.83% 36.68%
Total 505,431,285 735,395,453 100.00% 100.00%
(a) Total number of voting rights that may be exercised at Shareholders’ Meetings.
Highlights of the first half of 2019 include:
• further double-digit increases in revenue and profit fromrecurring operations;
• strong growth in Asia, the United States and Europe, particularlyin France, which saw a rebound in the second quarter;
• good start to the year for Wines & Spirits;
• remarkable momentum at Louis Vuitton where profitabilityremains at an exceptional level;
• remarkable performance of Christian Dior Couture;
• rapid progress of LVMH’s perfumes & cosmetics flagship brands;
• good progress in jewelry, in particular for Bvlgari;
• Sephora's strong revenue growth in stores and online;
• solid progress of DFS, particularly in Europe, benefiting fromthe rise in international travelers;
• the completion in April of the acquisition of the Belmondhotel group, whose activity will be consolidated in the thirdquarter of 2019;
• announcement of the agreement with Stella McCartney House;
• operating free cash flow of 1.7 billion euros;
• net debt to equity ratio (“gearing”) of 24.5% as at the end ofJune 2019.
4 Interim Financial Report - Six-month period ended June 30, 2019
HIGHLIGHTS
5Interim Financial Report - Six-month period ended June 30, 2019
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATEDFINANCIAL STATEMENTS OF LVMH GROUP
1. COMMENTS ON THE CONSOLIDATED INCOME STATEMENT 62. WINES & SPIRITS 103. FASHION & LEATHER GOODS 114. PERFUMES & COSMETICS 135. WATCHES & JEWELRY 146. SELECTIVE RETAILING 157. COMMENTS ON THE CONSOLIDATED BALANCE SHEET 168. COMMENTS ON THE CONSOLIDATED CASH FLOW STATEMENT 18
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
6 Interim Financial Report - Six-month period ended June 30, 2019
Comments on the consolidated income statement
Change in revenue per quarter (EUR millions and percentage)
(a) The principles used to determine the net impact of exchange rate fluctuations onthe revenue of entities reporting in foreign currencies and the net impact ofchanges in the scope of consolidation are described on page 9.
Consolidated revenue for the period ended June 30, 2019 was 25,082 million euros, up 15% from the first half of 2018.The Group’s main invoicing currencies strengthened againstthe euro – in particular the US dollar, which rose 7% – boostingrevenue growth.
No changes to the Group’s consolidation scope have occurredsince January 1, 2018.
On a constant consolidation scope and currency basis, revenueincreased by 12%.
Revenue by invoicing currency
(as %) June 30, Dec. 31, June 30, 2019 2018 2018
Euro 21 22 22US dollar 29 29 29Japanese yen 7 7 7Hong Kong dollar 6 6 6Other currencies 37 36 36
Total 100 100 100
The breakdown of revenue by invoicing currency changed verylittle with respect to the first half of 2018: the contribution ofthe euro fell by 1 point, while that of “Other currencies” rose by1 point to 37%. The contributions of the US dollar, the Japaneseyen and the Hong Kong dollar remained stable at 29%, 7% and 6%, respectively.
Revenue by geographic region of delivery
(as %) June 30, Dec. 31, June 30, 2019 2018 2018
France 9 10 9Europe (excl. France) 17 19 18United States 23 24 23Japan 7 7 7Asia (excl. Japan) 33 29 31Other markets 11 11 12
Total 100 100 100
By geographic region of delivery and compared to June 30,2018, the relative contributions of Europe (excluding France)and “Other markets” to Group revenue fell by 1 point to 17%and 11%, respectively. The contribution of Asia (excluding Japan)rose 2 points to 33%, while the relative contributions of France,the United States and Japan remained stable at 9%, 23% and 7%,respectively.
Revenue by business group
(EUR millions) June 30, Dec. 31, June 30, 2019 2018 2018
Wines & Spirits 2,486 5,143 2,271Fashion & Leather Goods 10,425 18,455 8,594Perfumes & Cosmetics 3,236 6,092 2,877Watches & Jewelry 2,135 4,123 1,978Selective Retailing 7,098 13,646 6,325Other activities and eliminations (298) (633) (295)
Total 25,082 46,826 21,750
By business group, the breakdown of Group revenue changedmore appreciably. The contribution of Fashion & Leather Goodsrose 2 points to 42%, while the contributions of Watches &Jewelry and Selective Retailing decreased by 1 point each to 8%and 28%, respectively. The contributions of Perfumes & Cosmeticsand Wines & Spirits remained stable at 13% and 10%, respectively.
Revenue for Wines & Spirits increased by 9% based on publishedfigures. Boosted by a positive exchange rate impact of 3 points,revenue for this business group increased by 6% on a constantconsolidation scope and currency basis. Champagne and winesachieved growth of 6% based on published figures and 5% on a constant consolidation scope and currency basis, while cognacand spirits grew by 12% based on published figures and 7% on a constant consolidation scope and currency basis. Thisperformance was largely driven by higher prices as well as anincrease in sales volumes. Demand remained very strong in theUnited States and in Asia, particularly China, which reaffirmedits status as the second-largest market for the Wines & Spiritsbusiness group.
1. COMMENTS ON THE CONSOLIDATED INCOME STATEMENT
1.1 Analysis of revenue
11%12% 12%
––
–
5%3% 3%
12,53816% 12,544
15%25,082
15%
2nd quarter1st quarter 1st half-year
Organic growthChanges in the scope of consolidation (a)
Exchange rate fluctuations (a)
7Interim Financial Report - Six-month period ended June 30, 2019
Comments on the consolidated income statement
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
(EUR millions) June 30, Dec. 31, June 30, 2019 2018(1) 2018(1)
Revenue 25,082 46,826 21,750Cost of sales (8,447) (15,625) (7,130)
Gross margin 16,635 31,201 14,620
Marketing and selling expenses (9,563) (17,755) (8,305)General and administrative expenses (1,789) (3,466) (1,679)Income/(loss) from joint ventures and associates 12 23 12
Profit from recurring operations 5,295 10,003 4,648Operating margin (%) 21.1 21.4 21.4
IFRS 16 Leases was applied as of January 1, 2019. In accordancewith the standard, data for fiscal year 2018 was not restated.
The Group achieved a gross margin of 16,635 million euros, up 14% from the first half of 2018. As a percentage of revenue,the gross margin was 66%, 0.9 points lower than in the first half of 2018.
Marketing and selling expenses totaled 9,563 million euros, up15% based on published figures and up 12% on a constantconsolidation scope and currency basis. This increase was mainlydue to the development of retail networks but also to highercommunications investments, especially in Perfumes & Cosmetics.The level of these expenses expressed as a percentage of revenueremained stable at 38%. Among these marketing and sellingexpenses, advertising and promotion costs amounted to 12% ofrevenue, increasing by 14% on a constant consolidation scopeand currency basis.
The geographic breakdown of stores is as follows:
(number) June 30, Dec. 31, June 30, 2019 2018 2018
France 522 514 514Europe (excl. France) 1,163 1,153 1,132United States 792 783 754Japan 420 422 414Asia (excl. Japan) 1,341 1,289 1,195Other markets 461 431 407
Total 4,699 4,592 4,416
General and administrative expenses totaled 1,789 million euros,up 7% based on published figures and up 5% on a constantconsolidation scope and currency basis. They amounted to 7%of revenue, down 0.6 points relative to the first half of 2018.
Profit from recurring operations by business group
(EUR millions) June 30, Dec. 31, June 30, 2019 2018(1) 2018(1)
Wines & Spirits 772 1,629 726Fashion & Leather Goods 3,248 5,943 2,775Perfumes & Cosmetics 387 676 364Watches & Jewelry 357 703 342Selective Retailing 714 1,382 612Other activities and eliminations (183) (330) (171)
Total 5,295 10,003 4,648
The Group’s profit from recurring operations was 5,295 millioneuros, up 14%. Restated for the positive 77 million euro impactof the initial application of IFRS 16, this increase amounted to12%. The Group’s operating margin as a percentage of revenuewas 21.1%, down 0.3 points from the first half of 2018
1.2 Profit from recurring operations
Fashion & Leather Goods posted organic growth of 18%, equatingto 21% based on published figures. This business group’sperformance was driven by the very solid momentum achievedby Louis Vuitton and Christian Dior Couture, as well as by Loewe,Rimowa, Berluti, Fendi and Loro Piana, which confirmed theirpotential for strong growth.
Revenue for Perfumes & Cosmetics increased by 9% on a constantconsolidation scope and currency basis, and by 12% based onpublished figures. This performance confirmed the effectivenessof the value-enhancing strategy resolutely pursued by the Group’sbrands in the face of competitive pressures. The Perfumes &Cosmetics business group saw significant revenue growth in Asia,particularly in China.
Revenue for Watches & Jewelry increased by 4% on a constantconsolidation scope and currency basis, and by 8% based onpublished figures. The business group was boosted by strongmomentum at Bvlgari, as well as solid performance at Hublotand Chaumet. TAG Heuer continued its repositioning. Asia andJapan were the most buoyant regions.
Revenue for Selective Retailing increased by 8% on a constantconsolidation scope and currency basis, and by 12% based onpublished figures. The business group’s performance was drivenby Sephora, which saw appreciable growth in revenue, and byDFS, which recorded very strong growth, particularly in HongKong and Macao, as well as in Venice.
(1) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 to the condensed half-yearconsolidated financial statements regarding the impact of the application of IFRS 16.
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
8 Interim Financial Report - Six-month period ended June 30, 2019
Comments on the consolidated income statement
Change in profit from recurring operations (EUR millions)
(a) The principles used to determine the impact of exchange rate fluctuations on theprofit from recurring operations of entities reporting in foreign currencies and theimpact of changes in the scope of consolidation are described on page 9.
Exchange rate fluctuations had a positive overall impact of3 million euros on profit from recurring operations comparedto the first half of 2018. This total comprises the following threeitems: the impact of exchange rate fluctuations on export andimport sales and purchases by Group companies, the change inthe net impact of the Group’s policy of hedging its commercialexposure to various currencies, and the impact of exchange ratefluctuations on the consolidation of profit from recurringoperations of subsidiaries outside the eurozone.
On a constant consolidation scope and currency basis, theGroup’s profit from recurring operations increased by 14%, andby 12% restated for the positive 77 million euro impact of theinitial application of IFRS 16.
Wines & Spirits
June 30, Dec. 31, June 30, 2019 2018(1) 2018(1)
Revenue (EUR millions) 2,486 5,143 2,271Profit from recurring operations(EUR millions) 772 1,629 726Operating margin (%) 31.1 31.7 32.0
Profit from recurring operations for Wines & Spirits was 772 millioneuros, up 6% relative to the first half of 2018. Champagne andwines contributed 214 million euros, while cognacs and spiritsaccounted for 558 million euros. This performance was theresult of both sales volume growth and a robust price increasepolicy. The operating margin as a percentage of revenue forthis business group decreased by 0.9 points to 31.1%.
Fashion & Leather Goods
June 30, Dec. 31, June 30, 2019 2018(1) 2018(1)
Revenue (EUR millions) 10,425 18,455 8,594Profit from recurring operations (EUR millions) 3,248 5,943 2,775Operating margin (%) 31.2 32.2 32.3
Fashion & Leather Goods posted profit from recurring operationsof 3,248 million euros, up 17% compared to the first half of2018, and up 16% restated for the positive impact of the initialapplication of IFRS 16. Louis Vuitton maintained its exceptionallevel of profitability while continuing its robust investmentpolicy, Christian Dior Couture achieved a record performance,and Loewe and Rimowa confirmed their growth momentum.The other fashion brands continued to strengthen. The businessgroup’s operating margin as a percentage of revenue fell by1.1 points to 31.2%.
Perfumes & Cosmetics
June 30, Dec. 31, June 30, 2019 2018(1) 2018(1)
Revenue (EUR millions) 3,236 6,092 2,877Profit from recurring operations (EUR millions) 387 676 364Operating margin (%) 12.0 11.1 12.7
Profit from recurring operations for Perfumes & Cosmetics was387 million euros, up 6% compared to the first half of 2018.This growth was driven by Parfums Christian Dior, Guerlainand Parfums Givenchy, which posted improved results thanksto the success of their flagship product lines and stronginnovative momentum. The business group’s operating marginas a percentage of revenue fell by 0.7 points to 12.0%.
Watches & Jewelry
June 30, Dec. 31, June 30, 2019 2018(1) 2018(1)
Revenue (EUR millions) 2,135 4,123 1,978Profit from recurring operations (EUR millions) 357 703 342Operating margin (%) 16.7 17.1 17.3
Profit from recurring operations for Watches & Jewelry was357 million euros, up 4.5% relative to the first half of 2018, andup 3% restated for the positive impact of the initial applicationof IFRS 16. This increase was the result of strong performance at Bvlgari and Hublot. The operating margin as a percentageof revenue for the Watches & Jewelry business group fell by0.6 points to 16.7%.
+3
4,648
1st half-year2018
1st half-year2019
+644 – 5,295
(a)(a)Organicgrowth
Changes inthe scope of
consolidation
Exchangerate
fluctuations
(1) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 to the condensed half-yearconsolidated financial statements regarding the impact of the application of IFRS 16.
9Interim Financial Report - Six-month period ended June 30, 2019
Comments on the consolidated income statement
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
(EUR millions) June 30, Dec. 31, June 30, 2019 2018(1) 2018(1)
Profit from recurring operations 5,295 10,003 4,648Other operating income and expenses (54) (126) (70)
Operating profit 5,241 9,877 4,578
Net financial income/(expense) (205) (388) (22)Income taxes (1,431) (2,499) (1,264)
Net profit before minority interests 3,605 6,990 3,292Minority interests (337) (636) (288)Net profit, Group share 3,268 6,354 3,004
“Other operating income and expenses” amounted to a net expenseof 54 million euros, compared with a net expense of 70 millioneuros in the first half of 2018. As of June 30, 2019, “Otheroperating income and expenses” included 37 million euros inamortization and impairment charges for brands and goodwill.
The Group’s operating profit was 5,241 million euros, up 14%compared to the period ended June 30, 2018.
The net financial expense for the period ended June 30, 2019was 205 million euros, compared with a net financial expenseof 22 million euros as of June 30, 2018. This item comprised:
- the aggregate cost of net financial debt, which totaled 51 millioneuros, versus a cost of 56 million euros in the first half of 2018,representing a reduction of 5 million euros;
- interest on lease liabilities recognized as part of the initialapplication of IFRS 16, which amounted to an expense of145 million euros;
- other financial income and expenses, which amounted to anet expense of 9 million euros, compared to net income of34 million euros in the first half of 2018. The expense relatedto the cost of foreign exchange derivatives was 102 millioneuros, versus an expense of 68 million euros a year earlier.Lastly, other income from financial instruments, which mainlyarose from the change in the market value of available for salefinancial assets, amounted to net income of 93 million euros,compared to 102 million euros as of June 30, 2018.
The Group’s effective tax rate was 28%, remaining stable comparedto the first half of 2018.
Profit attributable to minority interests was 337 million euros,compared to 288 million euros in the first half of 2018; thistotal mainly includes profit attributable to minority interestsin Moët Hennessy and DFS.
The Group’s share of net profit was 3,268 million euros, comparedto 3,004 million euros in the first half of 2018. This represented13% of revenue in the first half of 2019, compared to 14% for the first half of 2018. The Group’s share of net profit in the firsthalf of 2019 was up 9% compared to the first half of 2018.
1.3 Other income statement items
Selective Retailing
June 30, Dec. 31, June 30, 2019 2018(1) 2018(1)
Revenue (EUR millions) 7,098 13,646 6,325Profit from recurring operations (EUR millions) 714 1,382 612Operating margin (%) 10.1 10.1 9.7
Profit from recurring operations for Selective Retailing was714 million euros, up 17% compared to the first half of 2018, and
up 9% restated for the positive impact of the initial applicationof IFRS 16. This performance was driven by DFS, which improvedits profitability. The business group’s operating margin as apercentage of revenue grew by 0.4 points to 10.1%.
Other activitiesThe result from recurring operations of “Other activities andeliminations” was a loss of 183 million euros, weakening with respectto the first half of 2018. In addition to headquarters expenses,this heading includes the results of the Media division, RoyalVan Lent yachts, and the Group’s hotel and real estate activities.
Comments on the determination of the impact of exchange rate fluctuations and changes in the scope of consolidation
The impact of exchange rate fluctuations is determined by translating the financial statements for the fiscal year of entities with a functional currency other than the euro at the priorfiscal year’s exchange rates, without any other restatements.The impact of changes in the scope of consolidation is determined as follows:- for the fiscal year’s acquisitions, by deducting from revenue for the fiscal year the amount of revenue generated during that fiscal year by the acquired entities, as of their initial
consolidation;- for the prior fiscal year’s acquisitions, by deducting from revenue for the fiscal year the amount of revenue generated over the months during which the acquired entities were not
consolidated in the prior fiscal year;- for the fiscal year’s disposals, by adding to revenue for the fiscal year the amount of revenue generated by the divested entities in the prior fiscal year over the months during which
those entities were no longer consolidated in the current fiscal year;- for the prior fiscal year’s disposals, by adding to revenue for the fiscal year the amount of revenue generated in the prior fiscal year by the divested entities.Profit from recurring operations is restated in accordance with the same principles.
(1) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 to the condensed half-yearconsolidated financial statements regarding the impact of the application of IFRS 16.
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
10 Interim Financial Report - Six-month period ended June 30, 2019
Wines & Spirits
June 30, Dec. 31, June 30, 2019 2018 2018
Revenue (EUR millions) 2,486 5,143 2,271Of which: Champagne and wines 960 2,369 903
Cognac and spirits 1,526 2,774 1,368
Sales volume (millions of bottles) Champagne 24.4 64.9 24.8Cognac 50.4 93.3 46.9Other spirits 8.7 19.1 8.8Still and sparkling wines 15.3 38.5 15.3
Revenue by geographic region of delivery (%) France 4 6 5Europe (excl. France) 15 19 15United States 36 32 33Japan 6 6 6Asia (excl. Japan) 27 23 27Other markets 12 14 14
Total 100 100 100
Profit from recurring operations(1)
(EUR millions) 772 1,629 726Operating margin (%) 31.1 31.7 32.0
Operating investments of the period (EUR millions) 112 298 108
(1) The financial statements as of December 31 and June 30, 2018 have not beenrestated to reflect the application of IFRS 16 Leases. See Note 1.2 to the condensedconsolidated financial statements regarding the impact of the application ofIFRS 16.
Highlights
The Wines & Spirits business group delivered a strong performance.Leveraging its high-quality brand portfolio, it continued topursue its value-enhancing strategy and consolidated its leadingposition in the prestige products segment, drawing on innovationand robust marketing investments. The business group sawstrong momentum, particularly in the United States, Asia andemerging markets.
Organic revenue growth was 5% while sales volumes were down 1%. The increased value was driven by more rapid growthin prestige cuvées and a firm price increase policy. Moët &Chandon gained further ground in its main markets andcelebrated the 150th anniversary of its iconic Moët Impérial cuvéewith a very special event at its historic estate, the Château deSaran. The Maison obtained two sustainable winegrowingcertifications for its environmental approach. Dom Pérignon
achieved strong growth, confirming the power of its value-enhancing strategy. The launches of Vintage 2008, Vintage Rosé 2006 and a limited edition designed by Lenny Kravitz were extremely well received. Veuve Clicquot was buoyed bythe momentum of Carte Jaune and its blended Rosé. La Grande Dame 2008, its exceptional cuvée unveiled worldwide this year,received a promising reception. The Maison ramped up itsinitiatives to empower women entrepreneurs. Ruinart maintainedits strong growth, driven by markets in Europe and the UnitedStates. Through its collaboration with Brazilian artist Vik Muniz,the Maison once again illustrated its support for contemporaryart and its love of nature. Krug kept up its innovative momentumwith the introduction of its Krug Grande Cuvée 167e Édition andKrug Rosé 23e Édition. The “Krug and the Single Ingredient” serieswas once again a great success.
Estates & Wines won a number of awards, reinforcing its wines’reputation for excellence. Breaking new ground in the world of wine, Chandon launched Chandon Apéritif in Argentina, a highly innovative product in its category. The acquisition of Château du Galoupet, which holds the acclaimed Cru Classédes Côtes-de-Provence designation, marked Moët Hennessy’sdebut in the promising category of high-end rosé.
Organic revenue growth for cognac was 8%, with sales volumesup 8%. Hennessy’s solid performance during the period addedto its successful track record in recent years, in particular 2018,when the Maison became the world’s leading premium spiritsbrand. Its V.S and V.S.O.P ranges of cognac were the main growthdrivers in the first half of the year. The Maison enjoyed strongmomentum in its key markets (the United States, China andtravel retail), as well as a surge in emerging markets (includingAfrica and the Caribbean), where it made further inroads. Whilecontinuing to grow, Hennessy ramped up its investments to maintainits high level of quality and spur its innovative momentum,illustrated in particular by James Hennessy, X.X.O and the newmarketing campaign for X.O directed by Sir Ridley Scott.
Boosted by growing demand for high-quality products,Glenmorangie and Ardbeg whiskies solidified their positioningin prestigious award-winning single malts.
Belvederevodka continued its global expansion and differentiateditself in the United States with Single Estate Rye. The Polish distilleryworked on an ambitious green energy plan.
Clos 19 strengthened its position as an innovative e-commerceplatform and continued its expansion in the United States.
Woodinville Whiskey Company continued its development in a number of US states.
Volcán De Mi Tierra tequila recorded very solid growth inNorth America.
2. WINES & SPIRITS
11Interim Financial Report - Six-month period ended June 30, 2019
Fashion & Leather Goods
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
June 30, Dec. 31, June 30, 2019 2018 2018
Revenue (EUR millions) 10,425 18,455 8,594
Revenue by geographic region of delivery (%) France 8 9 9Europe (excl. France) 23 23 23United States 17 18 17Japan 11 11 11Asia (excl. Japan) 32 31 32Other markets 9 8 8
Total 100 100 100
Type of revenue as a percentage of total revenue (excluding Louis Vuitton and Christian Dior Couture) Retail 68 67 64Wholesale 31 32 35Licenses 1 1 1
Total 100 100 100
Profit from recurring operations(1)
(EUR millions) 3,248 5,943 2,775Operating margin (%) 31.2 32.2 32.3
Operating investments of the period (EUR millions) 544 827 325
Number of stores 1,902 1,852 1,772
(1) The financial statements as of December 31 and June 30, 2018 have not beenrestated to reflect the application of IFRS 16 Leases. See Note 1.2 to the condensedconsolidated financial statements regarding the impact of the application ofIFRS 16.
Highlights
Louis Vuitton’s exceptional momentum was driven by itscreativity, which was ever more impactful and innovative acrossall its product categories. The half-year period featured a wealthof developments, with revenue growth well balanced betweenemblematic lines and new creations. Following the lineage ofprevious collaborations, the Artycapucines leather goods collectionbrought together Capucines models designed by six artiststogether with the Maison’s workshops. The Monogram Giantcapsule collection featured an oversized version of the Maison’ssignature Monogram print, while Horizon Soft, the latest range ofluggage designed by Marc Newson, was even lighter and moreconvenient than its predecessors. On the marketing front,Capucines, Twist and Dauphine – the Maison’s “New Classics” –were proudly brandished by muses Emma Stone, Alicia Vikanderand Léa Seydoux. The 2020 Cruise ready-to-wear collection– designed by Nicolas Ghesquière as a fashion dialogue betweenNew York and Paris – had its runway show debut at the TWAFlight Center at JFK Airport. Louis Vuitton took the occasionto unveil the prototype for an ultra-innovative canvas that candisplay moving images on the bags that feature this material.Virgil Abloh, Creative Director of Menswear, launched a newproduct line, Louis Vuitton Staples Edition, which revisits men’swardrobe essentials. Other half-year highlights for the businessgroup included the new B Blossom jewelry collection, anextension of the Tambour watch range and three new fragrancesinspired by the Californian summer. The quality-focusedtransformation of its store network continued, with emblematiclocations reopening in Florence, London (Sloane Street),Monaco and Shanghai (IFC). The Maison continued to reinforceits production capacity, with the opening of a new leather goods workshop that has received the “BREEAM Very Good”envionmental certification, in the Maine-et-Loire departmentof western France at the beginning of the year. Its website foronline sales in Europe was recently launched and is available in seven European countries. Louis Vuitton launched its first e-commerce website in France in 2005 and has since extendedit to 19 other countries worldwide.
3. FASHION & LEATHER GOODS
Outlook
Resolutely pursuing its value-enhancing strategy, the Wines & Spirits business group will continue to draw on excellenceand innovation to strengthen its positions in an uncertain sales environment, where demand remains squarely focused onquality. The diverse range of customer experience the businessgroup has built up, thanks to the strength of its creative, high-quality product portfolio, will help its brands meet their goal
of resonating with new lifestyles and winning over the nextgeneration of consumers. Backed by a powerful network andengaged retail staff, over the months ahead the Wines & SpiritsMaisons will continue to invest heavily in enhancing the appealof their brands and increasing their production capacity, whilemaintaining an active, quality-driven sourcing policy. Remainingtrue to their long-term vision, they will step up their pioneeringenvironmental and social initiatives, and explore innovativesolutions alongside their different partners and stakeholders.
Christian Dior Couture turned in an exceptional performancein all its product categories and all its regions. Runway showsreflected the Maison’s remarkable creativity: at the Champ deMars, the choreography of Kim Jones’ Menswear collectionevoked the tableaux vivants (living pictures) of the past century;Maria Grazia Chiuri’s Haute Couture collection was unveiled ina dreamlike circus-inspired show under a grand tent at theMusée Rodin; a tribute to diversity, the 2020 Cruise show washeld at El Badi Palace in Marrakesh, mixing African and Europeancultures and expertise. In leather goods, the new 30 Montaigneline – named after the Maison’s historic address – perfectlyillustrates its timeless elegance and expertise, while for the thirdedition of the Dior Lady Art project, eleven women artists weregiven carte blanche to express their vision of the iconic LadyDior. After Paris and Denver, a new exhibition touched down inLondon at the Victoria and Albert Museum, and in Dallas.
Fendi enjoyed excellent momentum, with especially robustgrowth among its emblematic products such as the Baguette line,which saw very strong demand. As part of the expansion of itsstore network, the Maison inaugurated its first location in Monaco.The main highlight of the half-year was the last runway showof Karl Lagerfeld, after 54 years of shared history with the brandand the Fendi family. An exceptional show featuring both men’sand women’s collections at the Powerlong Museum in Shanghaiand a ceremony at the Grand Palais in Paris paid homage to thelegendary fashion designer. The Couture show in Rome in earlyJuly once again illustrated Fendi’s exceptional expertise through54 looks in honor of Lagerfeld’s years with the Maison.
Loro Piana’s growth was driven by the vitality of its iconic rangesas well as its “Excellences” lines, such as The Gift of Kings, whichwon over customers with its unrivalled lightness, and its vicuñawool collection. Footwear also turned in a strong performance,boosted by the launch of a personalized service and the openingof a pop-up store in New York’s Meatpacking District.
Hedi Slimane’s first ready-to-wear collections for Celinewere launched in stores in March. The Maison simultaneouslyinaugurated its new store concept, which it plans to roll outprogressively. The runway shows held in the first half of theyear, which were very well received, reflected the Maison’s newidentity.
For Givenchy, the half-year’s main highlights were the launchof its new Mystic leather goods line and regaining direct controlof its distribution in South Korea. The Maison presented its first menswear collection designed by Clare Waight Keller,in the maze-like gardens of Villa Palmieri in Florence, Italy.
Under the leadership of Creative Director Jonathan Anderson,Loewe recorded remarkable growth in all its markets, driven inparticular by the commercial and media success of ready-to-wear and new handbags, including its Gate model. A series ofevents raised the Maison’s profile and accompanied the launchof its capsule collections, a limited edition inspired by Dumbo,Paula’s Ibiza women’s collection and the Eye/Loewe/Nature men’scollection.
Kenzo continued to reinforce its retail presence with a newstore in New York and those that became directly operated inChina at the end of 2018. In June, Fashion Week was an occasionto celebrate the remarkable growth achieved under the creativedirectorship of Humberto Leon and Carol Lim who, after eightyears at Kenzo, decided to focus on their own label, OpeningCeremony. Felipe Oliveira Baptista joined Kenzo as its newCreative Director.
Berluti enjoyed excellent momentum, driven by Japan andChina in particular. Kris Van Assche’s first ready-to-wear showswere very well received. New collections which arrived in storesimpressed and expanded the brand’s clientele. Its retail networkcontinued its selective development.
Rimowa extended its store network and unveiled new brandambassadors for its global marketing campaign. The half-year’shighlights included three collaborations on limited editions,with Bang & Olufsen and artists Daniel Arsham and Alex Israel,as well as the launch of new colors for luggage in the Essentialline. The first capsule collection produced as a collaborationbetween Rimowa and Dior Homme was also revealed.
Designer Marc Jacobs successfully launched the new line called The Marc Jacobs for his eponymous brand, offeringcontemporary wardrobe essentials.
Continuing the relationship between LVMH and Rihanna, inMay Fenty – the singer’s newly created fashion house – launchedits website and opened two pop-up stores in Paris and New York.
Patou was acquired by LVMH and welcomed Guillaume Henryas Creative Director to relaunch its women’s ready-to-wear.
Outlook
Staying true to its blend of creative momentum, spirit of innovationand unique wealth of artisanal expertise, Louis Vuitton willcontinue to enrich its fascinating universe and craft the mostbeautiful experiences for its customers. The months ahead willsee high-impact initiatives across all its product categories andthe launch of plans for flagship stores. Campaigns and eventsclosely interwoven with Louis Vuitton’s business highlights willsupport upcoming developments. Christian Dior’s core valuesof innovation and excellence will continue to expand its reach and guide its strong growth. An exceptional concept storeon the Champs-Élysées in Paris will temporarily take over fromthe Maison’s historic 30 avenue Montaigne location, which isundergoing a major transformation. Fendi will continue toexpand its collections as well as its partnerships with the worldof art and music. All of the Maisons will maintain their focus oncreativity in their collections, achieving excellence in retail andthe customer experience, and strengthening their digitalstrategy.
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
12 Interim Financial Report - Six-month period ended June 30, 2019
Fashion & Leather Goods
June 30, Dec. 31, June 30, 2019 2018 2018
Revenue (EUR millions) 3,236 6,092 2,877
Revenue by geographic region of delivery (%) France 9 11 11Europe (excl. France) 19 22 21United States 13 16 14Japan 5 5 5Asia (excl. Japan) 43 35 37Other markets 11 11 12
Total 100 100 100
Profit from recurring operations(1)
(EUR millions) 387 676 364Operating margin (%) 12.0 11.1 12.7
Operating investments of the period (EUR millions) 171 330 135
Number of stores 376 354 316
(1) The financial statements as of December 31 and June 30, 2018 have not beenrestated to reflect the application of IFRS 16 Leases. See Note 1.2 to the condensedconsolidated financial statements regarding the impact of the application ofIFRS 16.
Highlights
The prestige and appeal of its Perfumes & Cosmetics Maisons,the vitality of their iconic lines, the quality of their innovations,as well as robust investments in communication stimulated thebusiness group’s growth and market share gains. Makeup andskincare were particularly dynamic and the market in Asiaremained very buoyant.
Following a record year, Parfums Christian Dior continued itsremarkable performance thanks to the strength of its flagshiplines. Beyond the early promise shown by Joy, the third best-selling perfume worldwide, growth in the women’s portfoliowas boosted by the success of the new Miss Dior eau de toiletteand the vitality of J’adore. Sauvage – which became the leadingmen’s fragrance in 2018 – maintained its remarkable performance.Maison Christian Dior saw strong growth, with an exceptionalcollection of fragrances available in dedicated stores, confirmingits potential, particularly in Asia. The Maison’s roots in Grasse,the perfume capital of the world, was central to each of itsfragrances and bolstered its international profile. Makeup inparticular was boosted by the continued success of the Maison’sRouge Dior lipstick, its Ultra-Rouge version and the new Dior AddictStellar Shine. The performance of its Forever foundation and the
Dior Backstage range – drawing inspiration from products usedby professional makeup artists backstage at runway shows –should also be highlighted. Growth in skincare was driven by the Asian markets and premium products. Dior Prestige, whosecore range continued to expand, saw strong growth in all regionsthrough its new Micro-Lotion de Rose, which joins Micro-Huile de Rose.
Guerlain experienced remarkable growth, driven by its AbeilleRoyale and Orchidée Impériale skincare lines and by Rouge G andits new Essentiel foundation in makeup. This momentum wasparticularly strong in China and in travel retail. With twelve yearsof environmental and social commitments in fields as varied asbiodiversity, sustainable design, climate change and socialinclusion, Guerlain became the first cosmetics Maison to launcha transparency and traceability platform, Bee Respect, providinga behind-the-scenes look at the life-cycle of its creations. In May,it held the third edition of the Bee University program atUNESCO, assembling leading experts to identify concretesolutions to aid bee conservation.
Parfums Givenchy recorded strong growth once again. Makeupenjoyed increased success in Asia, particularly in China. Growthaccelerated in Europe and the rest of the world, thanks to thesuccess of its fragrance L’Interdit.
At Kenzo Parfums, the momentum at Flower by Kenzo was buoyedby a new version of its Flower by Kenzo Eau de Vie fragrance. Fenty Beauty by Rihanna reaped the benefits of a very extensiveinnovation plan. It reaffirmed its success in new categories,including a lineup of concealers available in 50 different shades,bronzers, setting powders and lip glosses, and also continuedits strong social media campaign. Benefit continued to developits eyebrow collection with its flagship Gimme Brow and Preciselyproducts and the expansion of its brow bars, particularly inChina. Make Up For Ever launched a new long-lasting concealerwithin its highly popular Ultra-HD range. Fresh continued its robust growth in China and achieved a solid performance in the American market, supported by its flagship Rose, Black Teaand Lotus lines. Acqua di Parma relaunched its Barbiere line andoffered a completely renewed range of scents and candles forliving spaces. The Maison’s completely renovated store in Milanreopened its doors, while the first of its stores in China wereopened. Perfumes Loewe refreshed its visual identity andcommunication strategy, with strong growth in Spain, its historicalmarket. Maison Francis Kurkdjian launched its Gentle Fluidityduo, comprising two very distinct fragrances derived from thesame ingredients. The Ole Henriksen skincare brand continuedits growth in the United States as a result of a well-receiveddigital activation strategy on social media and interest generatedby its Banana Bright range.
4. PERFUMES & COSMETICS
13Interim Financial Report - Six-month period ended June 30, 2019
Perfumes & Cosmetics
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
June 30, Dec. 31, June 30, 2019 2018 2018
Revenue (EUR millions) 2,135 4,123 1,978
Revenue by geographic region of delivery (%) France 5 6 5Europe (excl. France) 21 23 22United States 8 9 9Japan 12 12 12Asia (excl. Japan) 40 35 37Other markets 14 15 15
Total 100 100 100
Profit from recurring operations(1)
(EUR millions) 357 703 342Operating margin (%) 16.7 17.1 17.3
Operating investments of the period (EUR millions) 142 303 145
Number of stores 440 428 413
(1) The financial statements as of December 31 and June 30, 2018 have not beenrestated to reflect the application of IFRS 16 Leases. See Note 1.2 to the condensedconsolidated financial statements regarding the impact of the application ofIFRS 16.
Highlights
Growth at the Watches & Jewelry Maisons was driven by thestrength of their iconic lines, the creativity of their new productsand increased brand awareness. The best performances wererecorded in jewelry and by the business group’s networks ofdirectly operated stores.
Bvlgari continued its remarkable performance and gained marketshare with particular success in the jewelry segment. Growthwas driven by the contribution of its iconic Serpenti, B.Zero1,Diva and Lvcea lines, as well as Fiorever, a new collection launchedin 2018, inspired by a floral theme incorporating diamonds.The Maison celebrated the 20th anniversary of its B.Zero1 linewith an exhibition in Milan, along with the creation of specialseries and new versions of rings and bracelets. A fourth editionof the SerpentiForm exhibition was held in Chengdu, while theWild Pop high jewelry collection, reflecting Bvlgari’s quintessentialexpertise and spirit, was successively exhibited in London, Tokyoand Hong Kong. An array of creations encapsulating the Maison’sgreat watchmaking expertise were presented in Geneva and Basel,including the new Serpenti Seduttori, Octo Finissimo Chronographand Octo Finissimo Tourbillon Carbon, which set two new worldrecords with their exceptionally thin design and contemporaryelegance. Store openings and renovations continued in Monaco,alongside the installation of temporary stores at destinationsincluding the Champs-Élysées in Paris and Wynn Macau.
TAG Heuer continued to focus on its flagship Carrera, Aquaracerand Formula 1 lines, as it unveiled new models and special series.While the Golf Edition rounded out its range of smartwatches,the new Autavia collection marked the return of a legend,augmented with cutting-edge precision. TAG Heuer celebratedthe 50th anniversary of its Monaco model with the launch of limitededitions.
Hublot continued its robust growth. This solid momentum wasdriven by its emblematic Classic Fusion and Big Bang lines, andby the remarkable performance of Spirit of Big Bang, which madethe biggest contribution to sales growth. Each line featuredexceptional new models, such as the Classic Fusion Ferrari GT,illustrating the Maison’s power of innovation. Its profile wasraised by an intense program of communications campaigns
5. WATCHES & JEWELRY
Outlook
In a highly competitive environment, the Perfumes & Cosmeticsbusiness group will leverage the complementarity of its brandportfolio to consolidate its market share in 2019. Innovation,retail quality and communication investments, including digital,will remain the key priorities to achieving this ambition.Parfums Christian Dior will continue to showcase its iconicfragrances in conjunction with Couture and its roots in Grasse,while building a unique fragrance experience for its customers,particularly via the rollout of its Maison Christian Dior storeconcept. Makeup will be boosted by several innovations and astrong digital activation that will showcase the Maison’s artfulcolor palette and the spirit of its runway shows. Dior skincare
will continue its expansion in the premium segment and willbe boosted by strong growth in the Asian market. At Guerlain,the second half of the year will be highlighted by robust activityin the perfume sector, including strong support for Mon Guerlainwith a new campaign embodied by Angelina Jolie, alongsidethe continued international rollout of Aqua Allegoria and thedevelopment of the Guerlain Parfumeur boutique network.Parfums Givenchy will relaunch its emblematic couture-inspiredlipstick Le Rouge and unveil a new version of the fragranceL’Interdit. Kenzo Parfums will launch a new eau de parfum in itsKenzo World range. Make Up For Ever will build on its renownedexpertise in foundation with an innovative multi-purposeconcept. Fenty Beauty by Rihanna will intensify its efforts togain market share in Asia.
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
14 Interim Financial Report - Six-month period ended June 30, 2019
Watches & Jewelry
June 30, Dec. 31, June 30, 2019 2018 2018
Revenue (EUR millions) 7,098 13,646 6,325
Revenue by geographic region of delivery (%) France 10 12 11Europe (excl. France) 9 9 9United States 36 38 37Japan 2 2 2Asia (excl. Japan) 30 27 29Other markets 13 12 12
Total 100 100 100
Profit from recurring operations(1)
(EUR millions) 714 1,382 612Operating margin (%) 10.1 10.1 9.7
Operating investments of the period (EUR millions) 276 537 205
Number of stores Sephora 1,910 1,886 1,840Other 53 54 57
(1) The financial statements as of December 31 and June 30, 2018 have not beenrestated to reflect the application of IFRS 16 Leases. See Note 1.2 to the condensedconsolidated financial statements regarding the impact of the application ofIFRS 16.
Highlights
Selective Retailing delivered organic revenue growth of 8%,driven by the strong momentum of all of the business group’sMaisons.
Sephora recorded strong revenue growth, gaining new marketshare in all the countries in which it operates, with a significantacceleration in Asia and the Middle East. Its store networkcontinued to expand. Online sales grew rapidly. With locationsin 34 countries and its digital presence in 29 markets, the Maisoncapitalized on its omnichannel synergies to continually improvehow it serves its customers and achieve its ambition of buildingthe world’s favorite beauty community. The renovation of itsstores in La Défense in Paris, Dubai Mall and Times Square inManhattan, as well as the opening of magnificent flagship storesat Hudson Yards (New York) and China World (Beijing) letcustomers discover Sephora’s new concepts on every continent.The “We Belong To Something Beautiful” marketing campaignin North America illustrated Sephora’s commitment to itsinclusive core values so that everyone feels welcome in its stores.With an ever-larger and more innovative selection of products,Sephora cultivated the exclusivity of its offering. Its own SephoraCollection brand was very successful in attracting customers andbuilding loyalty. The Good Skincare range launched in the firsthalf of the year was a great success.
6. SELECTIVE RETAILING
Selective Retailing
15Interim Financial Report - Six-month period ended June 30, 2019
and events centered on sports and culture. Hublot continued toimprove the quality of its distribution and continued to developits store network, which is now its main source of growth. Two stores were opened in May, at Rome’s Piazza di Spagna andin Monte Carlo.
At Zenith, in addition to its iconic Chronomaster, Elite and Pilotcollections, the Defy line was enriched with new models andsaw rapid growth. The Maison continued to consolidate itsorganization while leveraging synergies offered by the otherwatchmaking Maisons.
Chaumet’s growth was largely driven by the impressive successof the Bee My Love collection, alongside the iconic Liens andJoséphine lines, with particularly strong momentum in China,Japan and the Middle East. Its collections were enhanced by new ring and bracelet additions to the Liens Evidence line aswell as the new Boléro watch. Work began on the full renovationof Chaumet’s historic location on the Place Vendôme in Paris. A temporary store on Boulevard Saint-Germain hosted anexhibition dedicated to flora and fauna, which are among theMaison’s major sources of inspiration.
Fred actively developed its Force 10 and 8°0 lines and launchedits new Ombre Féline collection.
Outlook
The Watches & Jewelry business group will maintain its targetof market share gains in 2019. This ambition will draw on thecreativity and masterful expertise of the Maisons’ watchmakersand jewelers, as well as the performance of their directly operatedstores. It will be coupled with an attentive approach to each specificmarket and carefully targeted resource allocation. Marketinginvestments will be robust, with a particular emphasis on digitalcommunications. Substantial resources will also be devoted toprograms focused on distribution quality and productivity.Bvlgari presented its new Cinemagia high jewelry collection inCapri at the end of June, paying tribute to the Italian Maison’slong-standing affinity with the silver screen. Also in June, a newexhibition entitled Bvlgari – The Story, The Dream opened at CastelSant’Angelo in Rome, celebrating Bvlgari and Italian fashion.The expansion of Bvlgari’s store network will continue. Chaumetwill open a flagship store at its 1881 Heritage site in Hong Kong,as will Hublot. Zenith and Fred will increase their presence inChina with a new store in Beijing and Shanghai, respectively.In January 2020, Bvlgari Resort Dubai will host the first exhibitionof LVMH’s Swiss watchmaking Maisons. This initiative will serveas a new platform to raise awareness of the Group’s brands, inaddition to the Geneva and Basel watch trade shows, and willstrengthen its foothold in the watchmaking sector.
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
(1) The financial statements as of December 31, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 to the condensed consolidated financialstatements regarding the impact of the application of IFRS 16.
(EUR millions) June 30, Dec. 31, Change 2019 2018(1)
Intangible assets 33,299 30,981 2,318Property, plant and equipment 16,225 15,112 1,113Right-of-use assets 12,138 - 12,138Other non-current assets 5,156 4,656 500
Non-current assets 66,818 50,749 16,069
Inventories 13,561 12,485 1,076Other current assets 10,545 11,066 (521)
Current assets 24,106 23,551 555
Assets 90,924 74,300 16,624
(EUR millions) June 30, Dec. 31, Change 2019 2018(1)
Equity 35,390 33,957 1,433Long-term borrowings 5,588 6,005 (417)Non-current lease liabilities 10,139 - 10,139Other non-current liabilities 18,759 17,505 1,254
Equity and non-current liabilities 69,876 57,467 12,409
Short-term borrowings 7,890 5,027 2,863Current lease liabilities 2,029 - 2,029Other current liabilities 11,129 11,806 (677)
Current liabilities 21,048 16,833 4,215
Liabilities and equity 90,924 74,300 16,624
7. COMMENTS ON THE CONSOLIDATED BALANCE SHEET
DFS continued to benefit from strong demand at long-hauldestinations in Oceania as well as Venice in Europe and its majormarkets in Hong Kong and Macao, despite a slowdown observedin recent months. The key shopping periods of Chinese NewYear and Golden Week were very successful. Through a logisticsagreement with Shenzhen Duty Free, DFS made its debut inthe Chinese market. Several “mini-programs” for travelers werelaunched on the WeChat social network and its online productoffering expanded rapidly. After appearances in Venice, Chengdu,Beijing and Macao in 2018, DFS’s Masters of Time exhibition,featuring a prestigious collection of watches and jewelry, openedin Sydney and Hawaii.
Starboard Cruise Services expanded its presence aboard newprestigious cruise ships following the expiration of contractswith certain cruise lines. It enriched its watches and jewelryoffering, notably by opening the largest Bvlgari store at sea.The careful attention paid to its different clientele segments wasan integral part of its new store concepts, which offered unique,personalized multisensory experiences tailored to each ship anddestination.
Le Bon Marché continued its growth, driven by its uniqueproduct selection, beautiful architecture and top-quality service.The half-year period featured an exhibition by Portuguese artistJoana Vasconcelos. Another highlight was the Geek mais Chicevent, a shopping experience for the third millennium, combiningdigital innovation with immersive discovery and featuring morethan 80 fashion, beauty and decor brands. The Maison’s SalonsParticuliers (private salons) opened at the beginning of June,accompanied by a personalized shopping and styling service.
Enjoying a dual presence on both banks of the Seine, La GrandeÉpicerie de Paris saw an increase in the number of visitors. The 24 Sèvres digital platform became 24S, a name that reflectsits increasingly international clientele.
Outlook
Sephora will continue to pursue its strategy, with ambitiousplans for geographic expansion and market share gains. It willopen its first stores in South Korea, Hong Kong and NewZealand in the second half of the year. Sephora will continue to leverage innovation and its in-depth understanding of itscustomers’ needs to offer them an ever more personalizedservice throughout the world. Employee engagement, trainingand expertise will remain the key priorities to meet this objectiveand guarantee customers an exceptional in-store and onlineexperience. In the second half of the year, DFS will benefit fromthe completion of major renovations, including two flagship T Gallerias in Hong Kong and Macao, as well as airport stores in San Francisco, Saipan, Okinawa and Cairns in Australia. A fourth store will open in Hong Kong in the very lively MongKok district, while work will continue at the La Samaritaine sitein Paris, in preparation for its grand opening planned for 2020.Le Bon Marché will continue to cultivate the exclusivity andquality of service upon which it has built its success. Transformationswill take place on the ground floor of the main store to welcomea highly discerning clientele and ensure their utmost satisfaction.A punk-themed exhibition will be held in the fall. La GrandeÉpicerie de Paris will keep working to enhance its appeal andbuild customer loyalty on both sides of the Seine.
16 Interim Financial Report - Six-month period ended June 30, 2019
Comments on the consolidated balance sheet
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
LVMH’s consolidated balance sheet as of end-June 2019 totaled90.9 billion euros, 16.6 billion euros higher than at year-end2018, including 12.1 billion euros related to the application ofIFRS 16 as of January 1, 2019, with right-of-use assets relating toleases with fixed lease payments recognized as assets in the balancesheet, offset against lease liabilities which were recognized asliabilities in the balance sheet. See Note 1.2 to the condensedconsolidated financial statements for details on the impact ofthe application of IFRS 16. Consequently, non-current assetsgrew significantly by 16.1 billion euros and amounted to 73% oftotal assets, compared with 68% as of year-end 2018.
Intangible assets grew by 2.3 billion euros, of which 1.9 billioneuros was due to the recognition of provisional goodwill onBelmond, plus 0.7 billion euros due to the impact on goodwillof the revaluation of purchase commitments for minority interests.Conversely, the application of IFRS 16 resulted in a decrease of0.4 billion euros in intangible assets, due to the reclassificationof leasehold rights as right-of-use assets.
Property, plant and equipment increased by 1.1 billion euros asa result of the inclusion in the scope of consolidation of theproperty, plant and equipment appearing on Belmond’s balancesheet at the acquisition date for 1.1 billion euros. Investmentsfor the half-year period, net of depreciation charges as well asdisposals, generated an increase of 0.3 billion euros; the commentson the cash flow statement provide further information oninvestments. Lastly, the application of IFRS 16 resulted in areclassification of -0.3 billion euros to “Right-of-use assets”,corresponding to assets held under finance leases.
Right-of-use assets amounted to 12.1 billion euros as of June 30,2019, including 11.8 billion euros related to the recognition ofright-of-use assets for leases with fixed payments, and 0.4 billioneuros related to the reclassification of leasehold rights, previouslypresented within “Intangible assets”. Store leases representedthe majority of right-of-use assets, for a total of 9.6 billion euros.
Other non-current assets increased by 0.5 billion euros, amountingto 5.2 billion euros, primarily as a result of the change in themarket value of derivatives.
Inventories were up 1.1 billion euros, an increase related toinventory build-up over the period (see “Comments on theconsolidated cash flow statement”).
Other current assets decreased by 0.5 billion euros, mainly dueto the 0.6 billion euro decrease in cash and cash equivalents,with operating receivables increasing slightly by 0.2 billion euros,while the market value of derivatives increased by 0.1 billioneuros.
The application of IFRS 16 resulted in the recognition of leaseliabilities for a total of 12.1 billion euros, including 10.1 billioneuros in non-current lease liabilities and 2.0 billion euros incurrent lease liabilities, offset against right-of-use assets.
Other non-current liabilities totaled 18.8 billion euros, up1.3 billion euros from 17.5 billion euros as of December 31, 2018.This growth was due, for 0.7 billion euros, to the increase inliabilities in respect of purchase commitments for minorityinterests and for 0.3 billion euros to the increase in the marketvalue of derivatives, as well increases in provisions and othernon-current liabilities and in deferred tax liabilities, for 0.2 billioneuros and 0.1 billion euros, respectively.
Lastly, other current liabilities decreased by 0.7 billion euros,amounting to 11.1 billion euros, mainly due to the decrease inoperating payables, linked to the seasonal nature of the Group’sactivities.
Net financial debt and equity
(EUR millions or as %) June 30, Dec. 31, Change 2019 2018(1) (2)
Long-term borrowings 5,588 6,005 (417)Short-term borrowings and derivatives 8,010 5,157 2,853
Gross borrowings after derivatives 13,598 11,162 2,436
Cash and cash equivalents (4,914) (5,675) 761
Net financial debt 8,684 5,487 3,197
Equity 35,390 33,957 1,433Net financial debt/Equity ratio 24.5% 16.2% 8.3 pts
(1) The financial statements as of December 31, 2018 have not been restated to reflectthe application of IFRS 16 Leases. See Note 1.2 to the condensed consolidatedfinancial statements regarding the impact of the application of IFRS 16.
(2) Net financial debt as of December 31, 2018 was adjusted to take into accountBelmond shares, presented within “Non-current available for sale financial assets”.See Note 18.1 to the 2018 consolidated financial statements.
The ratio of net financial debt to equity, amounted to 24.5%,up 8.3 points compared to 16.2% as of December 31, 2018. Thischange was mainly due to the acquisition of Belmond, whichcontributed 2.8 billion euros to the increase in the Group’s netfinancial debt.
Total equity amounted to 35.4 billion euros as of end-June 2019,up 1.4 billion euros from year-end 2018. Net profit for the six-month period, after the distribution of dividends, contributed1.2 billion euros to this increase. In addition, exchange ratefluctuations had a positive impact of 0.1 billion euros on thereserves of entities reporting in foreign currencies; this mainlyconcerned the reserves of entities reporting in US dollars. As of June 30, 2019, total equity was equal to 39% of total assets,compared to 46% as of year-end 2018.
17Interim Financial Report - Six-month period ended June 30, 2019
Comments on the consolidated balance sheet
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
Cash from operations before changes in working capital totaled7,399 million euros, up 1,935 million euros from 5,464 millioneuros a year earlier. After tax and interest paid on net financialdebt and lease liabilities, and after the change in working capital,net cash from operating activities amounted to 4,189 millioneuros, up 1,028 million euros from the first half of 2018, including1,061 million euros related to the application of IFRS 16. Theimpact of the application of IFRS 16 consisted of the cancellationof depreciation of right-of-use assets for 1,171 million euros andthe recognition of interest paid on lease liabilities for 109 millioneuros. Since IFRS 16 was only applied to the 2019 fiscal year, net cash from operating activities for the first half of 2019 is notcomparable to the first half of 2018.
Interest paid on net financial debt totaled 37 million euros inthe first half of 2019, down 36 million euros from 73 millioneuros in the first half of 2018, due in particular to the change inthe amounts paid in respect of forward points relating to foreignexchange swaps having matured during the period.
Tax paid came to 1,191 million euros, 31% higher than 907 millioneuros paid a year earlier, mainly due to the increase in the Group’searnings in all the geographic regions in which it operates.
The 1,873 million euro increase in the working capital requirementwas 550 million euros higher than the level observed a yearearlier. The cash requirement relating to the increase in inventoriesamounted to 1,210 million euros for the half-year period, versus1,038 million euros a year earlier. The increase in inventoriesmainly concerned the Fashion & Leather Goods and Watches &Jewelry business groups. The decrease in trade accounts payableand tax and social security liabilities generated an additional cashrequirement of 917 million euros during the half-year period, a significant increase from 567 million euros in the first half of2018. The decrease in trade accounts receivable of 254 millioneuros (versus 282 million euros in the first half of 2018), helpedto finance only partially the cash requirement generated by theincrease in inventories and the decrease in operating liabilities.These changes reflect the seasonal nature of the Group’s businessactivities.
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
18 Interim Financial Report - Six-month period ended June 30, 2019
Comments on the consolidated cash flow statement
8. COMMENTS ON THE CONSOLIDATED CASH FLOW STATEMENT
(EUR millions) June 30, 2019 June 30, 2018(1) Variation
Cash from operations before changes in working capital 7,399 5,464 1,935Cost of net financial debt: interest paid (37) (73) 36Lease liabilities: interest paid (109) - (109)Tax paid (1,191) (907) (284)Change in working capital (1,873) (1,323) (550)
Net cash from operating activities 4,189 3,161 1,028
Operating investments (1,423) (1,204) (219)Repayment of lease liabilities (1,071) - (1,071)
Operating free cash flow 1,695 1,957 (262)
Financial investments including purchase and sale of consolidated investments (1,965) (35) (1,930)Equity-related transactions (2,339) (2,134) (205)Change in cash before financing activities (2,609) (212) (2,397)
(1) The financial statements as of June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 to the condensed consolidated financial statementsregarding the impact of the application of IFRS 16.
Gross borrowings after derivatives totaled 13.6 billion euros asof end-June 2019, up 2.4 billion euros compared with year-end2018. Bond debt increased by 0.7 billion euros, following thetwo bond issues completed during the half-year period totaling1 billion euros, and partly offset by the repayment of the0.3 million euro bond issued in 2014. Moreover, commercialpaper outstanding increased by 1.9 billion euros and bankborrowings by 0.1 billion euros. Following the application ofIFRS 16, finance lease liabilities were reclassified as lease liabilities,which are excluded from net financial debt, resulting in a decrease
of 0.3 billion euros in net financial debt. Cash, cash equivalents,and current and non-current available for sale financial assetsused to hedge financial debt totaled 4.9 billion euros as of end-June 2019, down 0.8 billion euros from 5.7 billion euros atyear-end 2018. Net financial debt thus increased by 3.2 billioneuros.
As of end-June, 2019, the Group’s undrawn confirmed credit linesamounted to 5.9 billion euros, exceeding the outstanding portionof its commercial paper program, which came to 5.1 billioneuros as of June 30, 2019.
19Interim Financial Report - Six-month period ended June 30, 2019
Comments on the consolidated cash flow statement
BUSINESS REVIEW AND COMMENTS ON THE HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF LVMH GROUP
Operating investments net of disposals resulted in an outflowof 1,423 million euros as of June 30, 2019, compared to 1,204 millioneuros a year earlier. These mainly included investments by theGroup’s brands – notably Louis Vuitton, DFS, Sephora, Celineand Christian Dior Couture – in their retail networks. They alsoincluded investments related to the La Samaritaine project aswell as investments by the champagne houses and Hennessy intheir production equipment.
Repayment of lease liabilities totaled 1,071 million euros in thefirst half of 2019.
As of June 30, 2019, operating free cash flow amounted to1,695 million euros, down 13% from 1,957 million euros recordedin the first half of 2018. This indicator is defined in theconsolidated cash flow statement. In addition to net cash fromoperating activities, it includes operating investments andrepayment of lease liabilities, both of which the Group considersas related to its operating activities.
As of June 30, 2019, financial investments accounted for anoutflow of 1,965 million euros, including 1,878 million eurosfor the acquisition of Belmond and 81 million euros for purchase
and proceeds from sale of non-current available for sale financialassets. As of June 30, 2018, financial investments accounted foran outflow of 35 million euros.
Equity-related transactions generated an outflow of 2,339 millioneuros. This amount included 2,012 million euros in dividendspaid by LVMH SE during the first half of the year (excludingtreasury shares), which comprised the final dividend paymentin respect of fiscal year 2018, in addition to tax on dividendspaid for 66 million euros. Dividends paid to minority interestsin consolidated subsidiaries amounted to 334 million euros.Conversely, other equity-related transactions generated an inflowof 73 million euros, including 21 million euros related to theexercise of share subscription options.
The financing requirement after all transactions relating to operatingactivities, investing activities and equity-related transactionsthus totaled 2,609 million euros, of which 2,032 million euroswere financed by net proceeds from borrowings. The change inthe cumulative translation adjustment had a positive 15 millioneuro impact on cash balances, after which the period-end cashbalance was 562 million euros lower than year-end 2018, andtotaled 3,851 million euros.
20 Interim Financial Report - Six-month period ended June 30, 2019
Interim Financial Report - Six-month period ended June 30, 2019 21
CONDENSED HALF-YEARCONSOLIDATED FINANCIALSTATEMENTS
CONSOLIDATED INCOME STATEMENT 22CONSOLIDATED STATEMENT OF COMPREHENSIVE GAINS AND LOSSES 23CONSOLIDATED BALANCE SHEET 24CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 25CONSOLIDATED CASH FLOW STATEMENT 26SELECTED NOTES TO THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 27
Interim Financial Report - Six-month period ended June 30, 201922
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
(EUR millions, except for earnings per share) Notes June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Revenue 24 25,082 46,826 21,750Cost of sales (8,447) (15,625) (7,130)
Gross margin 16,635 31,201 14,620
Marketing and selling expenses (9,563) (17,755) (8,305)General and administrative expenses (1,789) (3,466) (1,679)Income/(loss) from joint ventures and associates 8 12 23 12
Profit from recurring operations 24 5,295 10,003 4,648
Other operating income and expenses 25 (54) (126) (70)
Operating profit 5,241 9,877 4,578
Cost of net financial debt (51) (117) (56)Interest on lease liabilities (145) - -Other financial income and expenses (9) (271) 34
Net financial income/(expense) 26 (205) (388) (22)
Income taxes 27 (1,431) (2,499) (1,264)
Net profit before minority interests 3,605 6,990 3,292
Minority interests 18 (337) (636) (288)
Net profit, Group share 3,268 6,354 3,004
Basic Group share of net earnings per share (EUR) 28 6.49 12.64 5.97Number of shares on which the calculation is based 503,611,097 502,825,461 502,816,581
Diluted Group share of net earnings per share (EUR) 28 6.48 12.61 5.96Number of shares on which the calculation is based 504,554,724 503,918,140 504,102,671
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
Interim Financial Report - Six-month period ended June 30, 2019 23
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE GAINS AND LOSSES
(EUR millions) Notes June 30, 2019 Dec. 31, 2018 June 30, 2018
Net profit before minority interests 3,605 6,990 3,292
Translation adjustments 101 274 133Amounts transferred to income statement 1 (1) -Tax impact 4 15 7
16.5, 18 106 288 140
Change in value of hedges of future foreign currency cash flows (12) 3 (7)Amounts transferred to income statement 25 (279) (266)Tax impact (3) 79 79
10 (197) (194)
Change in value of the cost of hedging instruments (81) (271) (159)Amounts transferred to income statement 109 148 56Tax impact (8) 31 25
20 (92) (78)
Gains and losses recognized in equity, transferable to income statement 136 (1) (132)
Change in value of vineyard land 6 - 8 -Amounts transferred to consolidated reserves - - -Tax impact - (2) -
- 6 -
Employee benefit commitments: change in value resulting from actuarial gains and losses (78) 28 -Tax impact 25 (5) -
(53) 23 -
Gains and losses recognized in equity, not transferable to income statement (53) 29 -
Comprehensive income 3,688 7,018 3,160Minority interests (338) (681) (303)
Comprehensive income, Group share 3,350 6,337 2,857
Interim Financial Report - Six-month period ended June 30, 201924
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
ASSETS (EUR millions) Notes June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Brands and other intangible assets 3 16,893 17,254 17,026Goodwill 4 16,406 13,727 14,026Property, plant and equipment 6 16,225 15,112 14,162Right-of-use assets 7 12,138 - -Investments in joint ventures and associates 8 715 638 640Non-current available for sale financial assets 9 910 1,100 883Other non-current assets 10 1,454 986 1,062Deferred tax 2,077 1,932 1,775
Non-current assets 66,818 50,749 49,574
Inventories and work in progress 11 13,561 12,485 11,883Trade accounts receivable 12 3,004 3,222 2,738Income taxes 334 366 463Other current assets 13 3,208 2,868 2,860Cash and cash equivalents 15 3,999 4,610 4,222
Current assets 24,106 23,551 22,166
Total assets 90,924 74,300 71,740
LIABILITIES AND EQUITY (EUR millions) Notes June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Equity, Group share 16.1 33,678 32,293 29,990Minority interests 18 1,712 1,664 1,492
Equity 35,390 33,957 31,482
Long-term borrowings 19 5,588 6,005 6,692Non-current lease liabilities 7 10,139 - -Non-current provisions and other liabilities 20 3,647 3,188 3,381Deferred tax 5,123 5,036 4,958Purchase commitments for minority interests’ shares 21 9,989 9,281 9,461
Non-current liabilities 34,486 23,510 24,492
Short-term borrowings 19 7,890 5,027 5,659Current lease liabilities 7 2,029 - -Trade accounts payable 22.1 5,163 5,314 4,608Income taxes 800 538 651Current provisions and other liabilities 22.2 5,166 5,954 4,848
Current liabilities 21,048 16,833 15,766
Total liabilities and equity 90,924 74,300 71,740
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(EUR millions) Number Share Share Treasury Cumulative Revaluation reserves Net profit Total equity of shares capital premium shares translation and other account adjustment Available Hedges of Vineyard Employee reserves Group Minority Total for sale future foreign land benefit share interests financial currency cash commit- assets flows and cost ments
of hedging Notes 16.1 16.1 16.3 16.5 18 As of December 31, 2017 507,042,596 152 2,614 (530) 354 - 130 1,114 (133) 25,268 28,969 1,408 30,377
Gains and losses recognized in equity 219 - (259) 3 20 - (17) 45 28Net profit 6,354 6,354 636 6,990Comprehensive income - - - 219 - (259) 3 20 6,354 6,337 681 7,018Stock option plan-related expenses 78 78 4 82(Acquisition)/disposal of treasury shares (256) (26) (282) - (282)Exercise of LVMH share subscription options 762,851 49 - 49 - 49Retirement of LVMH shares (2,775,952) (365) 365 - - - -Capital increase in subsidiaries - - 50 50Interim and final dividends paid (2,715) (2,715) (345) (3,060)Changes in control of consolidated entities (9) (9) 41 32Acquisition and disposal of minority interests’ shares (22) (22) (19) (41)Purchase commitments for minority interests’ shares (112) (112) (156) (268)As of December 31, 2018 505,029,495 152 2,298 (421) 573 - (129) 1,117 (113) 28,816 32,293 1,664 33,957
Impact of changes in accounting standards(a) (29) (29) - (29)As of January 1, 2019 505,029,495 152 2,298 (421) 573 - (129) 1,117 (113) 28,787 32,264 1,664 33,928
Gains and losses recognized in equity 102 - 27 - (48) - 81 1 82Net profit 3,268 3,268 337 3,605Comprehensive income - - - 102 - 27 - (48) 3,268 3,349 338 3,687Stock option plan-related expenses 34 34 2 36(Acquisition)/disposal of treasury shares 10 4 14 - 14Exercise of LVMH share subscription options 403,946 21 - 21 - 21Retirement of LVMH shares (2,156) - - - -Capital increase in subsidiaries - - 49 49Interim and final dividends paid (2,012) (2,012) (360) (2,372)Changes in control of consolidated entities 4 4 2 6Acquisition and disposal of minority interests’ shares (6) (6) 2 (4)Purchase commitments for minority interests’ shares 10 10 15 25As of June 30, 2019 505,431,285 152 2,319 (411) 675 - (102) 1,117 (161) 30,089 33,678 1,712 35,390
As of December 31, 2017 507,042,596 152 2,614 (530) 354 - 130 1,114 (133) 25,268 28,969 1,408 30,377
Gains and losses recognized in equity 97 - (244) - - - (147) 15 (132)Net profit 3,004 3,004 288 3,292Comprehensive income - - - 97 - (244) - - 3,004 2,857 303 3,160Stock option plan-related expenses 38 38 2 40(Acquisition)/disposal of treasury shares (80) (6) (86) - (86)Exercise of LVMH share subscription options 760,695 49 - 49 - 49Retirement of LVMH shares (2,015,257) (331) 331 - - - -Capital increase in subsidiaries - - 25 25Interim and final dividends paid (1,709) (1,709) (287) (1,996)Changes in control of consolidated entities - - (2) (2)Acquisition and disposal of minority interests’ shares (69) (69) (14) (83)Purchase commitments for minority interests’ shares (59) (59) 57 (2)As of June 30, 2018 505,788,034 152 2,332 (279) 451 - (114) 1,114 (133) 26,467 29,990 1,492 31,482
(a) The impact of changes in accounting standards arose from the application of IFRS 16 Leases as of January 1, 2019. See Note 1.2 regarding the impact of the application of IFRS 16.
Interim Financial Report - Six-month period ended June 30, 2019 25
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Interim Financial Report - Six-month period ended June 30, 201926
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT
(EUR millions) Notes June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
I. OPERATING ACTIVITIES Operating profit 5,241 9,877 4,578(Income)/loss and dividends received from joint ventures and associates 8 (9) 5 (2)Net increase in depreciation, amortization and provisions 1,193 2,302 1,066Depreciation of right-of-use assets 7.1 1,171 - -Other adjustments and computed expenses (197) (219) (178)
Cash from operations before changes in working capital 7,399 11,965 5,464Cost of net financial debt: interest paid (37) (113) (73)Lease liabilities: interest paid (109) - -Tax paid (1,191) (2,275) (907)Change in working capital 15.2 (1,873) (1,087) (1,323)
Net cash from operating activities 4,189 8,490 3,161
II. INVESTING ACTIVITIES Operating investments 15.3 (1,423) (3,038) (1,204)Purchase and proceeds from sale of consolidated investments 2 (1,885) (17) (5)Dividends received 1 18 18Tax paid related to non-current available for sale financial assets and consolidated investments - (2) (1)Purchase and proceeds from sale of non-current available for sale financial assets 9 (81) (400) (47)
Net cash from/(used in) investing activities (3,388) (3,439) (1,239)
III. FINANCING ACTIVITIES Interim and final dividends paid 15.4 (2,412) (3,090) (2,039)Purchase and proceeds from sale of minority interests (9) (236) (72)Other equity-related transactions 15.4 82 (205) (23)Proceeds from borrowings 19 2,988 1,529 1,571Repayment of borrowings 19 (956) (2,174) (822)Repayment of lease liabilities 7.2 (1,071) - -Purchase and proceeds from sale of current available for sale financial assets 14 - (147) (131)
Net cash from/(used in) financing activities (1,378) (4,323) (1,516)
IV. EFFECT OF EXCHANGE RATE CHANGES 15 67 29
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (I+II+III+IV) (562) 795 435
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 15.1 4,413 3,618 3,618CASH AND CASH EQUIVALENTS AT END OF PERIOD 15.1 3,851 4,413 4,053
TOTAL TAX PAID (1,256) (2,314) (951)
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
Alternative performance measure
The following table presents the reconciliation between “Net cash from operating activities” and “Operating free cash flow” for theperiods presented:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Net cash from operating activities 4,189 8,490 3,161Operating investments (1,423) (3,038) (1,204)Repayment of lease liabilities (1,071) - -
Operating free cash flow(a) 1,695 5,452 1,957
(a) Under IFRS 16, fixed lease payments are treated partly as interest payments and partly as principal repayments. For its own operational management purposes, the Group treats alllease payments as components of its “Operating free cash flow”, whether the lease payments made are fixed or variable. In addition, for its own operational managementpurposes, the Group treats operating investments as components of its “Operating free cash flow”.
SELECTED NOTES TO THE CONDENSEDHALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES 282. CHANGES IN OWNERSHIP INTERESTS IN CONSOLIDATED ENTITIES 303. BRANDS, TRADE NAMES AND OTHER INTANGIBLE ASSETS 314. GOODWILL 325. IMPAIRMENT TESTING OF INTANGIBLE ASSETS
WITH INDEFINITE USEFUL LIVES 326. PROPERTY, PLANT AND EQUIPMENT 327. LEASES 348. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES 359. NON-CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS 3610. OTHER NON-CURRENT ASSETS 3611. INVENTORIES AND WORK IN PROGRESS 3612. TRADE ACCOUNTS RECEIVABLE 3713. OTHER CURRENT ASSETS 3814. CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS 3815. CASH AND CHANGE IN CASH 3816. EQUITY 4017. STOCK OPTION AND SIMILAR PLANS 4218. MINORITY INTERESTS 4319. BORROWINGS 4420. PROVISIONS AND OTHER NON-CURRENT LIABILITIES 4621. PURCHASE COMMITMENTS FOR MINORITY INTERESTS’ SHARES 4722. TRADE ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES 4723. FINANCIAL INSTRUMENTS AND MARKET RISK MANAGEMENT 4824. SEGMENT INFORMATION 5125. OTHER OPERATING INCOME AND EXPENSES 5426. NET FINANCIAL INCOME/(EXPENSE) 5527. INCOME TAXES 5528. EARNINGS PER SHARE 5629. OFF-BALANCE SHEET COMMITMENTS 5630. EXCEPTIONAL EVENTS AND LITIGATION 5731. RELATED-PARTY TRANSACTIONS 5732. SUBSEQUENT EVENTS 57
Interim Financial Report - Six-month period ended June 30, 2019 27
Standards, amendments and interpretations for which application became mandatory in 2019
The Group applies IFRS 16 Leases as of January 1, 2019.
When entering into a lease involving fixed payments, thisstandard requires that a liability be recognized in the balancesheet, measured at the discounted present value of futurepayments and offset against a right-of-use asset depreciated overthe lease term.
The Group applied what is known as the “modified retrospective”transition method, under which a liability is recognized at thetransition date for an amount equal to the present value of the residual lease payments alone, offset against a right-of-useasset adjusted for the amount of prepaid lease payments oramounts recognized within accrued expenses; all the impacts ofthe transition were deducted from equity. The standard providedfor various simplification measures during the transition phase:in particular, the Group opted to apply the measures allowingit to exclude leases with a residual term of less than twelve monthsand leases of low-value assets, to continue applying the sametreatment to leases that qualified as finance leases under IAS 17,and not to capitalize costs directly related to signing leases.
The amount of the liability depends to a large degree on theassumptions used for the lease term and, to a lesser extent, thediscount rate. The Group’s extensive geographic coverage means
it encounters a wide range of different legal conditions whenentering into contracts. The lease term generally used to calculatethe liability is the term of the initially negotiated lease, nottaking into account any early termination or extension options,except in special circumstances. No lease liabilities are recognizedif LVMH and the lessor can cancel their commitment with less than 12 months’ notice. The discount rate is determinedfor each lease using the incremental borrowing rate of thesubsidiary entering into the lease. Given the structure of theGroup’s financing – virtually all of which is held or guaranteedby LVMH SE – in practice, this incremental borrowing rate is generally determined as the total of the risk-free rate for thelease currency, with respect to the duration, and the Group’scredit risk for this same reference currency and term.
Leasehold rights, previously recognized within “Intangibleassets”, as well as “Property, plant and equipment” related torestoration obligations for leased facilities, are now presentedwithin “Right-of-use assets” and subject to depreciation accordingto consistent principles.
The Group has implemented a dedicated IT solution to gatherlease data and run the calculations required by the standard.
Most leases are related to the Group’s retail premises (see Note 7for details). Such leases are actively managed and directly linkedto the conduct of Maisons’ business and their distributionstrategy.
1.2 Changes in the accounting framework applicable to LVMH
The condensed consolidated financial statements for the firsthalf of 2019 were approved by the Board of Directors on July 24,2019. These financial statements were prepared in accordancewith IAS 34 relating to the preparation of interim financialstatements, as well as international accounting standards andinterpretations (IAS/IFRS) adopted by the European Union andin force on June 30, 2019; these standards and interpretationswere applied consistently to the periods presented.
The interim financial statements are prepared using the sameaccounting principles and policies as those applied for thepreparation of the annual financial statements, with the exceptionof the determination of the income tax rate, which is calculatedbased on the expected rate for the fiscal year. Moreover, comparabilityof the Group’s half-year and annual financial statements may beaffected by the seasonal nature of the Group’s businesses, whichachieve a higher level of revenue during the second half of theyear than in the first half (see Note 24 “Segment information”).
Selected notes to the consolidated financial statements
1. ACCOUNTING POLICIES
1.1 General framework and environment
Interim Financial Report - Six-month period ended June 30, 201928
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
“Lease liabilities” totaled 11.8 billion euros as of January 1, 2019and comprised:
– lease liabilities newly recognized in respect of operating leasesin effect as of January 1, 2019 for 11.5 billion euros, including9.4 billion euros for long-term leases;
– finance lease liabilities for 0.3 billion euros, recognized under“Borrowings” as of December 31, 2018.
The average discount rate for lease liabilities at the transitiondate was 2.2%.
“Right-of-use assets” totaled 11.9 billion euros as of January 1, 2019and comprised:
– assets corresponding to newly recognized lease liabilities for11.5 billion euros;
– the carrying amount of property, plant and equipmentcovered by finance leases for 0.3 billion euros, recognizedwithin “Property, plant and equipment” as of December 31,2018;
– the carrying amount of leasehold rights for 0.4 billion euros,recognized within “Intangible assets” as of December 31, 2018;
– various lease-related current receivables and payables recognizedas of December 31, 2018 and reclassified within “Right-of-useassets”, representing a net liability of -0.3 billion euros, inparticular liabilities related to the recognition of leases on astraight-line basis.
The following table provides details on the difference betweenlease commitments presented in accordance with IAS 17 as ofDecember 31, 2018, and lease liabilities measured according toIFRS 16 as of January 1, 2019:
(EUR millions)
Commitments given for operating leases and concessions as of December 31, 2018 12,573
Minimum payments on finance leases as of December 31, 2018 830Impact of discounting (1,953)Other 378
Lease liabilities as of January 1, 2019 under IFRS 16 11,828
“Other” mainly comprises the recognition of optional periodsthat were not covered by the definition of off-balance sheetcommitments presented in accordance with IAS 17.
The impact of applying IFRS 16 on profit from recurringoperations and net profit is not significant.
Under the modified retrospective transition method, thestandard prohibits the restatement of comparative fiscal years.Given the importance of leases to the Group’s activities, and inorder to present consistent performance indicators, independentlyof the fixed or variable nature of lease payments, specific indicatorsare used for internal performance monitoring requirements andfinancial communication purposes; in particular, capitalizedfixed lease payments are deducted in their entirety from cashflow in order to calculate the aggregate entitled “Operating freecash flow”. In correlation, the liability for capitalized leases isexcluded from the definition of net financial debt.
The following table presents the impact of the application of IFRS 16 on the opening balance sheet:
(EUR millions) As of Impact of the As of Dec. 31, 2018 transition to Jan. 1, 2019 IFRS16
Brands, goodwill and intangible assets 30,981 (379) 30,602Property, plant and equipment 15,112 (355) 14,757Right-of-use assets - 11,867 11,867Other non-current assets 4,656 (13) 4,643Current assets 23,551 (53) 23,498
Total assets 74,300 11,067 85,367
Equity, Group share 32,293 (29) 32,264Minority interests 1,664 - 1,664Non-current lease liabilities - 9,679 9,679Provisions and other non-current liabilities 23,510 (343) 23,167Current lease liabilities - 2,149 2,149Other current liabilities 16,833 (389) 16,444
Total liabilities and equity 74,300 11,067 85,367
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019 29
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
On April 17, 2019, pursuant to the transaction agreement announcedon December 14, 2018 and approved by Belmond’s shareholderson February 14, 2019, LVMH acquired, for cash, all the Class Ashares of Belmond Ltd at a unit price of 25 US dollars, for atotal of 2.2 billion US dollars. After taking into account theshares acquired on the market in December 2018, the carryingamount of Belmond shares held came to 2.3 billion euros.Following this acquisition, Belmond’s Class A shares were nolonger listed on the New York Stock Exchange.
Belmond, which has locations in 24 countries, owns and operatesan exceptional portfolio of very high-end hotels and travelexperiences in the world’s most desirable, prestigious destinations.
The following table details the provisional allocation of thepurchase price paid by LVMH on April 17, 2019, the date ofacquisition of the controlling interest:
(EUR millions) Provisional purchase price allocation
Brand and other intangible assets 6Property, plant and equipment 1,119Other current and non-current assets 202Net financial debt (586)Deferred tax (80)Current and non-current liabilities (335)Minority interests (1)
Net assets acquired 325
Provisional goodwill 1,928
Carrying amount of shares held as of April 17, 2019 2,253
The amounts presented in the table above are taken from Belmond’sunaudited financial statements at the date of acquisition of thecontrolling interest; there has been no revaluation. The mainitems that may be subject to revaluation are real estate assetsand the Belmond brand.
The carrying amount of shares held as of the date of acquisitionof the controlling interest includes shares acquired in 2018 for274 million euros.
During the six-month period, the Belmond acquisition generatedan outflow of 1,878 million euros, net of cash acquired in theamount of 101 million euros. Following the acquisition of thecontrolling interest, Belmond’s long-term bank borrowings wererepaid in the amount of 560 million euros.
No components of Belmond’s activities were recorded in LVMH’s2019 interim consolidated financial statements. For 2018 as awhole, Belmond had consolidated revenue of 577 million USdollars, and an operating profit of 12 million US dollars.
2. CHANGES IN OWNERSHIP INTERESTS IN CONSOLIDATED ENTITIES
Belmond
The Group applies IFRIC 23 Uncertainty over Income TaxTreatments as of January 1, 2019. It did not have any significantimpact on the Group’s financial statements.
As a result of the application of new standards that took effecton January 1, 2019 – IFRS 16 in particular – the presentation ofthe balance sheet and cash flow statement was modified and
simplified in order to make these statements easier to understand.This included separating “Purchase commitments for minorityinterests’ shares” from other balance sheet liabilities, while otheritems were grouped together, with detailed breakdowns insertedin additional notes.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201930
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
3. BRANDS, TRADE NAMES AND OTHER INTANGIBLE ASSETS
(EUR millions) June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Gross Amortization Net Net Net and impairment
Brands 14,317 (724) 13,593 13,596 13,523Trade names 3,873 (1,596) 2,277 2,265 2,229License rights 94 (83) 11 13 14Software, websites 2,030 (1,478) 552 544 457Other 1,057 (597) 460 836 803
Total 21,371 (4,478) 16,893 17,254 17,026
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
As of December 31 and June 30, 2018, “Other intangible assets” included leasehold rights. As from January 1, 2019, in accordancewith IFRS 16, leasehold rights are now presented within “Right-of-use assets” (see Note 7).
Movements during the six-month period in the net amounts of brands, trade names and other intangible assets were as follows:
Gross value Brands Trade names Software, Other intangible Total(EUR millions) websites assets
As of December 31, 2018 14,292 3,851 1,903 1,964 22,010
Impact of changes in accounting standards(a) - - - (770) (770)
As of January 1, 2019, after restatement 14,292 3,851 1,903 1,194 21,240
Acquisitions - - 57 144 201Disposals and retirements - - (13) (102) (115)Changes in the scope of consolidation - - 8 - 8Translation adjustment 25 22 5 5 57Reclassifications - - 70 (90) (20)
As of June 30, 2019 14,317 3,873 2,030 1,151 21,371
Amortization Brands Trade names Software, Other intangible Totaland impairment (EUR millions) websites assets
As of December 31, 2018 (696) (1,586) (1,359) (1,115) (4,756)
Impact of changes in accounting standards(a) - - - 391 391
As of January 1, 2019, after restatement (696) (1,586) (1,359) (724) (4,365)
Amortization expense (5) - (128) (67) (200)Impairment expense (20) - - 5 (15)Disposals and retirements - - 13 102 115Changes in the scope of consolidation - - (1) - (1)Translation adjustment (3) (10) (3) (3) (19)Reclassifications - - - 7 7
As of June 30, 2019 (724) (1,596) (1,478) (680) (4,478)
Carrying amount as of June 30, 2019 13,593 2,277 552 471 16,893
(a) The impact of changes in accounting standards arose from the application of IFRS 16 Leases as of January 1, 2019. See Note 1.2.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019 31
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
4. GOODWILL
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Gross Impairment Net Net Net
Goodwill arising on consolidated investments 12,350 (1,752) 10,598 8,654 8,514Goodwill arising on purchase commitments for minority interests’ shares 5,808 - 5,808 5,073 5,512
Total 18,158 (1,752) 16,406 13,727 14,026
Changes in net goodwill during the periods presented break down as follows:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Gross Impairment Net Net Net
As of January 1 15,462 (1,735) 13,727 13,837 13,837Changes in the scope of consolidation 1,935 - 1,935 45 (35)Changes in purchase commitments for minority interests’ shares 733 - 733 (126) 248Changes in impairment - (11) (11) (100) (61)Translation adjustment 28 (5) 23 71 37
As of period-end 18,158 (1,752) 16,406 13,727 14,026
Changes in the scope of consolidation mainly resulted from the acquisition of Belmond. See Note 2.
See also Note 21 for goodwill arising on purchase commitments for minority interests’ shares.
5. IMPAIRMENT TESTING OF INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES
Brands, trade names and other intangible assets with indefinite useful lives as well as the goodwill arising on acquisition weresubject to annual impairment testing as of December 31, 2018. No significant impairment expense was recognized during the firsthalf of 2019, as no events likely to lead to a material loss in value occurred during the period.
6. PROPERTY, PLANT AND EQUIPMENT
(EUR millions) June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Gross Depreciation Net Net Net and impairment
Land 2,779 (85) 2,694 2,838 2,456Vineyard land and producing vineyards(b) 2,587 (114) 2,473 2,473 2,420Buildings 5,280 (2,040) 3,240 2,292 2,327Investment property 639 (37) 602 602 534Leasehold improvements, machinery and equipment 13,207 (9,094) 4,113 4,078 3,882Assets in progress 1,432 (2) 1,430 1,237 1,034Other property, plant and equipment 2,210 (537) 1,673 1,592 1,509
Total 28,134 (11,909) 16,225 15,112 14,162
Of which: historical cost of vineyard land 577 - 577 576 533
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
(b) Almost all of the carrying amount of “Vineyard land and producing vineyards” corresponds to vineyard land.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201932
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
“Other property, plant and equipment” includes in particularthe works of art owned by the Group.
Purchases of property, plant and equipment mainly includeinvestments by the Group’s brands – notably Louis Vuitton,DFS, Sephora, Celine and Christian Dior Couture – in theirretail networks. They also included investments related to theLa Samaritaine project as well as investments by the champagnehouses and Hennessy in their production equipment.
Changes in the scope of consolidation mainly resulted fromthe acquisition of Belmond. See Note 2.
Translation adjustments arose mainly on property, plant andequipment recognized in US dollars, due to exchange ratefluctuations against the euro between the beginning and endof the period.
Changes in property, plant and equipment during the period broke down as follows:
Gross value Vineyard land Land and Investment Leasehold improvements, Assets in Other Total(EUR millions) and producing buildings property machinery and equipment progress property, vineyards plant and Stores Production, Other equipment logistics
As of December 31, 2018 2,584 7,051 637 8,632 2,756 1,351 1,238 2,074 26,323
Impact of changes in accounting standards(a) - (395) - (149) (50) (32) (3) (1) (630)
As of January 1, after restatement 2,584 6,656 637 8,483 2,706 1,319 1,235 2,073 25,693
Acquisitions 3 56 1 241 66 37 650 63 1,117Change in the market value of vineyard land - - - - - - - - -Disposals and retirements - (18) (24) (201) (32) (30) (16) (9) (330)Changes in the scope of consolidation - 1,172 - 261 - - - 89 1,522Translation adjustment 1 25 1 64 5 5 1 4 106Other movements, including transfers (1) 168 24 176 66 41 (438) (10) 26
As of June 30, 2019 2,587 8,059 639 9,024 2,811 1,372 1,432 2,210 28,134
Depreciation Vineyard land Land and Investment Leasehold improvements, Assets in Other Totaland impairment and producing buildings property machinery and equipment progress property, (EUR millions) vineyards plant and Stores Production, Other equipment logistics
As of December 31, 2018 (111) (1,921) (35) (5,907) (1,810) (944) (1) (482) (11,211)
Impact of changes in accounting standards(a) - 135 - 88 28 23 (1) 2 275
As of January 1, after restatement (111) (1,786) (35) (5,819) (1,782) (921) (2) (480) (10,936)
Depreciation expense (3) (90) (2) (478) (88) (67) - (33) (761)Impairment expense - - - 1 - - (15) - (14)Disposals and retirements - 17 - 203 32 28 14 10 304Changes in the scope of consolidation - (227) - (141) - - - (35) (403)Translation adjustment - (9) - (42) (4) (3) - (2) (60)Other movements, including transfers - (30) - 4 (15) (2) 1 3 (39)
As of June 30, 2019 (114) (2,125) (37) (6,272) (1,857) (965) (2) (537) (11,909)
Carrying amount as of June 30, 2019 2,473 5,934 602 2,752 954 407 1,430 1,673 16,225
(a) The impact of changes in accounting standards arose from the application of IFRS 16 Leases as of January 1, 2019. See Note 1.2.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019 33
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
7. LEASES
7.1 Right-of-use assets
Right-of-use assets break down as follows, by type of underlying asset:
(EUR millions) June 30, 2019 January 1, 2019
Gross Depreciation Net Net and impairment
Stores 10,597 (999) 9,598 9,472Offices 1,605 (162) 1,443 1,332Other 789 (64) 725 718
Capitalized fixed lease payments 12,991 (1,225) 11,766 11,522
Leasehold rights 751 (379) 372 345
Total 13,742 (1,604) 12,138 11,867
The net amounts of right-of-use assets changed as follows during the half-year period:
Gross value Capitalized fixed lease payments Leasehold Total(EUR millions)
Stores Offices Other Total rights
As of January 1, 2019 9,531 1,365 728 11,624 673 12,297
New leases entered into 918 279 66 1,263 42 1,305Changes in assumptions 87 (5) (2) 80 - 80Leases ended or canceled (101) (6) (10) (117) (22) (139)Changes in scope of consolidation 56 - - 56 2 58Translation adjustment 76 8 6 90 2 92Other movements, including transfers 30 (36) 1 (5) 54 49
As of June 30, 2019 10,597 1,605 789 12,991 751 13,742
Depreciation and impairment Capitalized fixed lease payments Leasehold Total(EUR millions)
Stores Offices Other Total rights
As of January 1, 2019 (59) (33) (10) (102) (328) (430)
Depreciation and amortization expense (942) (138) (56) (1,136) (26) (1,162)Impairment expense - (6) - (6) (3) (9)Leases ended or canceled 22 2 2 26 8 34Changes in the scope of consolidation - - - - (5) (5)Translation adjustment 2 - - 2 (1) 1Other movements, including transfers (22) 13 - (9) (24) (33)
As of June 30, 2019 (999) (162) (64) (1,225) (379) (1,604)
Carrying amount as of June 30, 2019 9,598 1,443 725 11,766 372 12,138
“New leases entered into” mainly concern store leases, in particular for Sephora, Christian Dior Couture, DFS and Louis Vuitton.They also include leases of office space, mainly for Parfums Christian Dior.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201934
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
7.2 Lease liabilities
Lease liabilities break down as follows:
(EUR millions) June 30, 2019 January 1, 2019
Non-current lease liabilities 10,139 9,679Current lease liabilities 2,029 2,149
Total 12,168 11,828
The change in lease liabilities during the half-year period breaks down as follows:
(EUR millions) Stores Offices Other Total
As of January 1, 2019 9,692 1,420 716 11,828
New leases entered into 907 277 65 1,249Principal repayments (892) (122) (49) (1,063)Change in accrued interest 30 4 1 35Leases ended or canceled (79) (4) (8) (91)Changes in assumptions 86 (5) (2) 79Changes in the scope of consolidation 56 - - 56Translation adjustment 79 8 6 93Other movements, including transfers 26 (45) 1 (18)
As of June 30, 2019 9,905 1,533 730 12,168
8. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Gross Impairment Net Of which Net Of which Net Of which joint joint joint arrangements arrangements arrangementsShare of net assets of joint ventures and associates as of January 1 638 - 638 278 639 273 639 273Share of net profit (loss) for the period 12 - 12 9 23 12 12 7Dividends paid (3) - (3) - (28) (9) (10) -Changes in the scope of consolidation 58 - 58 58 (10) 2 (11) 2Capital increases subscribed 3 - 3 2 3 1 2 1Translation adjustment 3 - 3 - 7 - 3 -Other, including transfers 4 - 4 4 4 (1) 5 1
Share of net assets of joint ventures and associates as of period-end 715 - 715 351 638 278 640 284
Changes in the scope of consolidation mainly resulted from the acquisition of Belmond. See Note 2.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019 35
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
9. NON-CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
As of January 1 1,100 789 789
Acquisitions 117 450 92Disposals at net realized value (40) (45) (25)Changes in market value(a) 7 (101) 17Changes in the scope of consolidation - - -Translation adjustment 2 16 10Reclassifications (276) (9) -
As of period-end 910 1,100 883
(a) Recognized within “Net financial income/(expense)”.
Reclassifications resulted from the acquisition of a controlling interest in Belmond, with the shares acquired in 2018 for 274 millioneuros being included in the carrying amount of the investment held in Belmond. See Note 2.
10. OTHER NON-CURRENT ASSETS
(EUR millions) June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Warranty deposits 408 379 348Derivatives(b) 696 257 371Loans and receivables 305 303 306Other 45 47 37
Total 1,454 986 1,062
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
(b) See Note 23.
11. INVENTORIES AND WORK IN PROGRESS
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Gross Impairment Net Net Net
Wines and eaux-de-vie in the process of aging 4,845 (11) 4,834 4,784 4,541Other raw materials and work in progress 2,410 (439) 1,971 1,700 1,620
7,255 (450) 6,805 6,484 6,161
Goods purchased for resale 2,526 (230) 2,296 2,091 1,966Finished products 5,421 (961) 4,460 3,910 3,756
7,947 (1,191) 6,756 6,001 5,722
Total 15,202 (1,641) 13,561 12,485 11,883
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201936
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019 37
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
The net change in inventories for the periods presented breaks down as follows:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Gross Impairment Net Net Net
As of January 1 14,069 (1,584) 12,485 10,888 10,888
Change in gross inventories 1,210 - 1,210 1,722 1,038Impact of provision for returns(a) (4) - (4) 7 -Impact of marking harvests to market 4 - 4 16 5Changes in provision for impairment - (217) (217) (285) (138)Changes in the scope of consolidation 19 - 19 25 17Translation adjustment 78 (15) 63 109 68Other, including reclassifications (174) 175 1 3 5
As of period-end 15,202 (1,641) 13,561 12,485 11,883
(a) See Note 1.25 to the 2018 consolidated financial statements.
The impact of marking harvests to market on Wines & Spirits’ cost of sales and value of inventory is as follows:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Impact of marking the period’s harvest to market 11 41 14Impact of inventory sold during the period (7) (25) (9)
Net impact on cost of sales of the period 4 16 5
12. TRADE ACCOUNTS RECEIVABLE
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Trade accounts receivable, nominal amount 3,081 3,302 2,812Provision for impairment (77) (78) (74)Provision for product returns - (2) -
Net amount 3,004 3,222 2,738
(a) See Note 1.25 to the 2018 consolidated financial statements.
The change in trade accounts receivable for the periods presented breaks down as follows:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Gross Impairment Net Net Net
As of January 1 3,300 (78) 3,222 2,736 2,736
Changes in gross receivables (285) - (285) 179 (304)Changes in provision for impairment - 2 2 (1) 3Changes in provision for product returns(a) - - - 7 -Changes in the scope of consolidation 34 - 34 5 4Translation adjustment 36 - 36 24 26Reclassifications (4) (1) (5) 272 273
As of period-end 3,081 (77) 3,004 3,222 2,738
(a) See Note 1.25 to the 2018 consolidated financial statements.
The trade accounts receivable balance is comprised essentially of receivables from wholesalers or agents, who are limited in numberand with whom the Group maintains ongoing relationships for the most part.
13. OTHER CURRENT ASSETS
(EUR millions) June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Current available for sale financial assets(b) 788 666 728Derivatives(c) 159 123 145Tax accounts receivable, excluding income taxes 994 895 794Advances and payments on account to vendors 190 216 169Prepaid expenses 513 430 495Other receivables 564 538 529
Total 3,208 2,868 2,860
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
(b) See Note 14.(c) See Note 23.
14. CURRENT AVAILABLE FOR SALE FINANCIAL ASSETS
The net value of current available for sale financial assets changed as follows during the periods presented:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
As of January 1 666 515 515
Acquisitions - 311 191Disposals at net realized value - (164) (58)Changes in market value(a) 122 3 79Changes in the scope of consolidation - - -Translation adjustment - 1 1Reclassifications - - -
As of period-end 788 666 728
Of which: Historical cost of current available for sale financial assets 575 576 505
(a) Recognized within “Net financial income/(expense)”.
15. CASH AND CHANGE IN CASH
15.1 Cash and cash equivalents
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Term deposits (less than 3 months) 277 654 550SICAV and FCP funds 122 192 409Ordinary bank accounts 3,600 3,764 3,263
Cash and cash equivalents per balance sheet 3,999 4,610 4,222
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201938
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019 39
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
The reconciliation between cash and cash equivalents as shown in the balance sheet and net cash and cash equivalents appearing in the cash flow statement is as follows:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Cash and cash equivalents 3,999 4,610 4,222Bank overdrafts (148) (197) (169)
Net cash and cash equivalents per cash flow statement 3,851 4,413 4,053
15.2 Change in working capital
The change in working capital breaks down as follows for the periods presented:
(EUR millions) Notes June 30, 2019 Dec. 31, 2018 June 30, 2018
Change in inventories and work in progress 11 (1,210) (1,722) (1,038)Change in trade accounts receivable 12 285 (179) 304Change in balance of amounts owed to customers (31) 8 (22)Change in trade accounts payable 22.1 (159) 715 35Change in other receivables and payables (758) 91 (602)
Change in working capital (a) (1,873) (1,087) (1,323)
(a) Increase/(Decrease) in cash and cash equivalents.
15.3 Operating investments
Operating investments comprise the following elements for the periods presented:
(EUR millions) Notes June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Purchase of intangible assets 3 (201) (537) (198)Purchase of property, plant and equipment 6 (1,117) (2,590) (946)Change in accounts payable related to fixed asset purchases (62) 137 (47)Initial direct costs (43) - -
Net cash used in purchases of fixed assets (1,423) (2,990) (1,191)Net cash from fixed asset disposals 16 10 5Guarantee deposits paid and other cash flows related to operating investments (16) (58) (18)
Operating investments(b) (1,423) (3,038) (1,204)
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
(b) Increase/(Decrease) in cash and cash equivalents.
15.4 Interim and final dividends paid and other transactions related to equity
Interim and final dividends paid comprise the following elements for the periods presented:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Interim and final dividends paid by LVMH SE (2,012) (2,715) (1,709)Interim and final dividends paid to minority interests in consolidated subsidiaries (334) (339) (287)Tax paid related to interim and final dividends paid (66) (36) (43)
Interim and final dividends paid (2,412) (3,090) (2,039)
16.3 LVMH treasury shares
The portfolio of LVMH treasury shares is allocated as follows:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Number Amount Amount Amount
Share subscription option plans 411,450 20 20 54Bonus share plans 1,337,476 301 302 193
Shares held for stock option and similar plans(a) 1,748,926 321 322 247
Liquidity contract 44,000 16 25 32Shares pending retirement 270,000 74 74 -
LVMH treasury shares 2,062,926 411 421 279
(a) See Note 17 regarding stock option and similar plans.
As of June 30, 2019, the share capital consisted of 505,431,285 fullypaid-up shares (505,029,495 shares as of December 31, 2018 and505,788,034 as of June 30, 2018), with a par value of 0.30 eurosper share, including 230,051,242 shares with double voting rights(231,834,011 as of December 31, 2018 and 230,051,242 as ofJune 30, 2018). Double voting rights are attached to registeredshares held for more than three years.
During the six-month period, 403,946 shares were issued followingthe exercise of share subscription options, which resulted in an increase in the share capital and share premium account of21 million euros; 2,156 shares were retired.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201940
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Other transactions related to equity comprise the following elements for the periods presented:
(EUR millions) Notes June 30, 2019 Dec. 31, 2018 June 30, 2018
Capital increases of LVMH SE 16.2 21 49 49Capital increase in subsidiaries 45 41 16Acquisition and disposals of LVMH treasury shares 16.3 16 (295) (88)
Other equity-related transactions 82 (205) (23)
16. EQUITY
16.1 Equity
(EUR millions) Notes June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Share capital 16.2 152 152 152Share premium account 16.2 2,319 2,298 2,332LVMH shares 16.3 (411) (421) (279)Cumulative translation adjustment 16.5 675 573 451Revaluation reserves 854 875 867Other reserves 26,821 22,462 23,463Net profit, Group share 3,268 6,354 3,004
Equity, Group share 33,678 32,293 29,990
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
16.2 Share capital and share premium account
16.5 Cumulative translation adjustment
The change in “Cumulative translation adjustment” recognized within “Equity, Group share”, net of hedging effects of net assetsdenominated in foreign currency, breaks down as follows by currency:
(EUR millions) June 30, 2019 Change Dec. 31, 2018 June 30, 2018
US dollar 322 29 293 236Swiss franc 680 48 632 552Japanese yen 123 14 109 93Hong Kong dollar 364 10 354 340Pound sterling (112) 3 (115) (108)Other currencies (244) 6 (250) (227)Foreign currency net investment hedges(a) (458) (8) (450) (435)
Total, Group share 675 102 573 451
(a) Including: -143 million euros with respect to the US dollar (-141 million euros as of December 31, 2018 and -137 million euros as of June 30, 2018), -118 million euros with respectto the Hong Kong dollar (-117 million euros as of December 31, 2018 and as of June 30, 2018) and -200 million euros with respect to the Swiss franc (-193 million euros as ofDecember 31, 2018 and -184 million euros as of June 30, 2018). These amounts include the tax impact.
The final dividend for fiscal year 2018 was distributed on April 29,2019 in accordance with the resolutions of the Shareholders’Meeting of April 18, 2019.
At its meeting of July 24, 2019, the Board of Directors approvedthe payment on December 10, 2019, of an interim dividend of 2.20 euros per share for fiscal year 2019.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019 41
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
The market value of LVMH shares held under the liquidity contract as of June 30, 2019 amounted to 16 million euros.
The portfolio movements of LVMH treasury shares during the six-month period were as follows:
(Number of shares or EUR millions) Number Amount Impact on cash
As of December 31, 2018 2,135,404 421
Share purchases(a) 226,781 69 (69)Vested bonus shares (17,322) (1) -Retirement of shares (2,156) - -Disposals at net realized value(a) (279,781) (85) 85Gain/(loss) on disposal - 7 -
As of June 30, 2019 2,062,926 411 16
(a) Purchases and sales of LVMH shares mainly related to the management of the liquidity contract.
16.4 Dividends paid by the parent company LVMH SE
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Interim dividend for the current fiscal year (2018: 2.00 euros) - 1,010 -Impact of treasury shares - (4) -
Gross amount disbursed for the fiscal year - 1,006 -
Final dividend for the previous fiscal year (2018: 4.00 euros; 2017: 3.40 euros) 2,020 1,717 1,717Impact of treasury shares (8) (8) (8)
Gross amount disbursed for the previous fiscal year 2,012 1,709 1,709
Total gross amount disbursed during the period(a) 2,012 2,715 1,709
(a) Excluding the impact of tax regulations applicable to the recipient.
17. STOCK OPTION AND SIMILAR PLANS
17.1 Share subscription option plans
The number of unexercised share subscription options and the weighted average exercise price changed as follows during theperiods presented:
June 30, 2019 Dec. 31, 2018 June 30, 2018
Number Weighted average Number Weighted average Number Weighted average exercise price exercise price exercise price (EUR) (EUR) (EUR)
Share subscription options outstanding as of January 1 411,088 50.86 1,180,692 59.56 1,180,692 59.56Options expired (7,142) 50.86 (6,753) 63.98 (6,252) 65.04Options exercised (403,946) 50.86 (762,851) 64.21 (760,695) 64.24
Share subscription options outstanding as of period-end - - 411,088 50.86 413,745 50.86
17.2 Bonus share plans
The number of non-vested shares awarded changed as follows during the periods presented:
(number of shares) June 30, 2019 Dec. 31, 2018 June 30, 2018
Non-vested shares as of January 1 1,351,978 1,395,351 1,395,351Provisional allocations for the period - 462,281 452,804Shares vested during the period (17,322) (459,741) (93,156)Shares expired during the period (8,678) (45,913) (20,470)
Non-vested shares as of period-end 1,325,978 1,351,978 1,734,529
Vested share allocations were settled in existing shares held.
17.3 Expense for the period
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Expense for the period for share subscription option and bonus share plans 36 82 40
No new stock option or similar plan were set up during the half-year period.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201942
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Minority interests are composed primarily of Diageo’s 34% stakein Moët Hennessy SAS and Moët Hennessy International SAS(“Moët Hennessy”) and the 39% stake held by Mari-Cha GroupLtd (formerly Search Investment Group Ltd) in DFS. Since the34% stake held by Diageo in Moët Hennessy is subject to apurchase commitment, it is reclassified at the period-end within“Purchase commitments for minority interests’ shares” under“Other non-current liabilities” and is therefore excluded fromthe total amount of minority interests at the period-end. SeeNotes 21 and 1.12 to the 2018 consolidated financial statements.
Dividends paid to Diageo during the first half of 2019 in respectof fiscal year 2018 amounted to 178 million euros. Net profitattributable to Diageo for the first half of 2019 was 166 millioneuros, and its share in accumulated minority interests (beforethe accounting impact of the purchase commitment granted toDiageo) came to 3,206 million euros as of June 30, 2019.
Dividends paid to Mari-Cha Group Ltd during the first half of2019 in respect of fiscal year 2018 amounted to 99 million euros.Net profit attributable to Mari-Cha Group Ltd for the first halfof 2019 was 100 million euros, and its share in accumulatedminority interests as of June 30, 2019 came to 1,428 million euros.
18. MINORITY INTERESTS
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
As of January 1 1,664 1,408 1,408
Minority interests’ share of net profit 337 636 288Dividends paid to minority interests (360) (345) (287)Impact of changes in control of consolidated entities 2 41 (2)Impact of acquisition and disposal of minority interests’ shares 2 (19) (14)Capital increases subscribed by minority interests 49 50 25Minority interests’ share in gains and losses recognized in equity 1 45 15Minority interests’ share in stock option plan expenses 2 4 2Impact of changes in minority interests with purchase commitments 15 (156) 57
As of period-end 1,712 1,664 1,492
The change in minority interests’ share in gains and losses recognized in equity breaks down as follows:
(EUR millions) Cumulative Hedges of future Vineyard land Revaluation Total share of translation foreign currency adjustments minority interests adjustment cash flows and of employee cost of hedging benefits
As of December 31, 2018 115 (14) 260 (33) 328
Changes during the period 4 2 - (5) 1
As of June 30, 2019 119 (12) 260 (38) 329
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019 43
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201944
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
19. BORROWINGS
19.1 Net financial debt
(EUR millions) June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Bonds and Euro Medium-Term Notes (EMTNs) 5,360 5,593 6,287Finance leases - 315 303Bank borrowings 228 97 102
Long-term borrowings 5,588 6,005 6,692
Bonds and Euro Medium-Term Notes (EMTNs) 1,950 996 1,551Commercial paper 5,077 3,174 3,290Bank overdrafts 148 197 169Other short-term borrowings 715 660 649
Short-term borrowings 7,890 5,027 5,659
Gross borrowings 13,478 11,032 12,351
Interest rate risk derivatives (34) (16) (33)Foreign exchange risk derivatives 154 146 112
Gross borrowings after derivatives 13,598 11,162 12,430
Current available for sale financial assets(b) (788) (666) (728)Non-current available for sale financial assets used to hedge financial debt (127) (125) (121)Cash and cash equivalents(c) (3,999) (4,610) (4,222)
Net financial debt 8,684 5,761 7,359
Belmond shares (presented within “Non-current available for sale financial assets”)(d) - (274) -
Adjusted net financial debt, excluding the acquisition of Belmond shares 8,684 5,487 7,359
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
(b) See Note 14.(c) See Note 15.1.(d) See Note 8 to the 2018 consolidated financial statements.
The change in net financial debt during the period is as follows:
(EUR millions) Dec. 31, Impact of Jan. 1, 2019, Impact Translation Impact Changes in Reclas- June 30, 2018 changes in after on cash(b) adjust- of market the scope sifications 2019 accounting restatement ment value of conso- and Other
standards(a) changes lidation
Long-term borrowings 6,005 (315) 5,690 466 1 16 685 (1,270) 5,588Short-term borrowings 5,027 (26) 5,001 1,577 17 2 3 1,290 7,890
Gross borrowings 11,032 (341) 10,691 2,043 18 18 688 20 13,478
Derivatives 130 - 130 13 - (17) - (6) 120
Gross borrowings after derivatives 11,162 (341) 10,821 2,056 18 1 688 14 13,598
(a) The impact of changes in accounting standards arose from the application of IFRS 16 Leases as of January 1, 2019. See Note 1.2.(b) Including a positive impact of 2,988 million euros in respect of proceeds from borrowings and a negative impact of 956 million euros in respect of repayment of borrowings.
19.2 Analysis of gross borrowings by payment date and by type of interest rate
(EUR millions) Gross borrowings Impact of derivatives Gross borrowings after derivatives
Fixed Floating Total Fixed Floating Total Fixed Floating Total rate rate rate rate rate rate
Maturity: June 30, 2020 7,668 223 7,891 (113) 251 138 7,555 474 8,029June 30, 2021 1,607 7 1,614 (415) 394 (21) 1,192 401 1,593June 30, 2022 2,063 - 2,063 (1,301) 1,296 (5) 762 1,296 2,058June 30, 2023 698 - 698 17 - 17 715 - 715June 30, 2024 1,206 3 1,209 (301) 292 (9) 905 295 1,200June 30, 2025 - - - - - - - - -
Thereafter - 3 3 - - - - 3 3
Total 13,242 236 13,478 (2,113) 2,233 120 11,129 2,469 13,598
See Note 23.3 regarding the market value of interest rate risk derivatives.
19.3 Analysis of gross borrowings by currency after derivatives
(EUR millions) June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Euro 8,541 6,445 7,637US dollar 4,148 3,277 3,596Swiss franc - - 171Japanese yen 587 662 601Other currencies 322 778 425
Total 13,598 11,162 12,430
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
The purpose of foreign currency borrowings is to finance the development of the Group’s activities outside the eurozone, as well asthe Group’s assets denominated in foreign currency.
Changes in the scope of consolidation were related to theacquisition of Belmond. The bank borrowings on Belmond’sbalance sheet at the acquisition date were repaid in the amountof 560 million euros. See Note 2.
In April 2019, LVMH completed two fixed-rate bond issuestotaling 1 billion euros, comprised of 300 million euros in bondsmaturing in 2021 and 700 million euros in bonds maturing in 2023.
During the half-year period, LVMH repaid the 300 million eurosbond issued in 2014.
Net financial debt does not include purchase commitments forminority interests (see Note 21) or lease liabilities (see Note 7).
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019 45
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Provisions for contingencies and losses correspond to the estimateof the impact on assets and liabilities of risks, disputes (see Note 30),or actual or probable litigation arising from the Group’sactivities; such activities are carried out worldwide, within whatis often an imprecise regulatory framework that is different for each country, changes over time and applies to areas rangingfrom product composition and packaging to relations with the Group’s partners (distributors, suppliers, shareholders insubsidiaries, etc.).
Non-current liabilities related to uncertain tax positions includedan estimate of the risks, disputes and actual or probable litigationrelated to the income tax computation. The Group’s entities inFrance and abroad may be subject to tax inspections and, incertain cases, to rectification claims from local administrations.A liability is recognized for these rectification claims, togetherwith any uncertain tax positions that have been identified butnot yet officially notified, the amount of which is regularlyreviewed in accordance with the criteria of the application ofIFRIC 23 Uncertainty over Income Tax Treatment.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201946
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
20. PROVISIONS AND OTHER NON-CURRENT LIABILITIES
Non-current provisions and other liabilities comprise the following:
(EUR millions) June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Non-current provisions 1,400 1,245 1,305Uncertain tax positions 1,204 1,185 1,257Derivatives 587 283 386Employee profit sharing 83 89 78Other liabilities 373 386 355
Non-current provisions and other liabilities 3,647 3,188 3,381
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
Provisions concern the following types of contingencies and losses:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Provisions for pensions, medical costs and similar commitments 695 605 639Provisions for contingencies and losses 705 640 666
Non-current provisions 1,400 1,245 1,305
Provisions for pensions, medical costs and similar commitments 6 7 4Provisions for contingencies and losses 319 362 343
Current provisions 325 369 347
Total 1,725 1,614 1,652
Changes in provisions were as follows during the half-year period:
(EUR millions) Dec. 31, Increases Amounts Amounts Changes in Other(a) June 30, 2018 used released the scope of 2019 consolidation
Provisions for pensions, medical costs and similar commitments 612 46 (36) - - 79 701Provisions for contingencies and losses 1,002 153 (84) (36) - (11) 1,024
Total 1,614 199 (120) (36) - (68) 1,725
(a) Including the impact of translation adjustment and change in revaluation reserves.
22. TRADE ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
22.1 Trade accounts payable
The change in trade accounts payable for the periods presented breaks down as follows:
(EUR millions) June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
As of December 31 5,314 4,539 4,539
Impact of changes in accounting standards (108) - -
As of January 1, after restatement 5,206 4,539 4,539
Change in trade accounts payable (159) 715 35Changes in amounts owed to customers (31) 8 (22)Changes in the scope of consolidation 98 7 29Translation adjustment 36 49 33Reclassifications 13 (4) (6)
As of period-end 5,163 5,314 4,608
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
22.2 Current provisions and other liabilities
(EUR millions) June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Current provisions(b) 325 369 347Derivatives(c) 213 166 79Employees and social institutions 1,395 1,668 1,291Employee profit sharing 59 105 57Taxes other than income taxes 623 685 523Advances and payments on account from customers 392 398 367Provision for product returns(d) 316 356 288Deferred payment for non-current assets 590 646 500Deferred income 274 273 260Other liabilities 979 1,288 1,136
Total 5,166 5,954 4,848
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
(b) See Note 20.(c) See Note 23.(d) See Note 1.25 to the 2018 consolidated financial statements.
As of June 30, 2019, purchase commitments for minority interests’shares mainly include the put option granted by LVMH toDiageo plc for its 34% share in Moët Hennessy, with six months’advance notice and for 80% of the fair value of Moët Hennessyat the exercise date of the option. This option may be exercisedat any time subject to a six-month notice period. The fair valueof this commitment was calculated by applying the share pricemultiples of comparable firms to Moët Hennessy’s consolidatedoperating results.
Moët Hennessy SAS and Moët Hennessy International SAS(“Moët Hennessy”) hold the LVMH group’s investments in theWines & Spirits businesses, with the exception of the equityinvestments in Château d’Yquem, Château Cheval Blanc, Clos desLambrays and Colgin Cellars, and excluding certain champagnevineyards.
Purchase commitments for minority interests’ shares also includecommitments relating to minority shareholders in Loro Piana(15%), Rimowa (20%), and distribution subsidiaries in variouscountries, mainly in the Middle East.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019 47
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
21. PURCHASE COMMITMENTS FOR MINORITY INTERESTS’ SHARES
23.2 Summary of derivatives
Derivatives are recorded in the balance sheet for the amounts and in the captions detailed as follows:
(EUR millions) Notes June 30, 2019 Dec. 31, 2018 June 30, 2018
Interest rate risk Assets: non-current 33 23 36 current 14 12 14 Liabilities: non-current (1) (7) (8) current (12) (12) (9)
23.3 34 16 33
Foreign exchange risk Assets: non-current 103 18 46 current 140 108 131 Liabilities: non-current (26) (60) (89) current (201) (154) (70)
23.4 16 (88) 18
Other risks Assets: non-current 560 216 289 current 5 3 - Liabilities: non-current (560) (216) (289) current - - -
5 3 -
Total Assets: non-current 10 696 257 371 current 13 159 123 145 Liabilities: non-current 20 (587) (283) (386) current 22 (213) (166) (79)
55 (69) 51
Financial instruments are mainly used by the Group to hedgerisks arising from Group activity and protect its assets.
The management of foreign exchange and interest rate risk, inaddition to transactions involving shares and financial instruments,is centralized.
The Group has implemented a stringent policy and rigorousmanagement guidelines to manage, measure, and monitor thesemarket risks.
These activities are organized based on a segregation of dutiesbetween risk measurement, hedging (front office), administration(back office) and financial control.
The backbone of this organization is an integrated informationsystem which allows hedging transactions to be monitoredquickly.
The Group’s hedging strategy is presented to the AuditCommittee. Hedging decisions are made according to anestablished process that includes regular presentations to theGroup’s Executive Committee and detailed documentation.
Counterparties are selected based on their rating and inaccordance with the Group’s risk diversification strategy.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019
23. FINANCIAL INSTRUMENTS AND MARKET RISK MANAGEMENT
23.1 Organization of foreign exchange, interest rate and equity market risk management
48
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
A significant portion of Group companies’ sales to customersand to their own retail subsidiaries as well as certain purchasesare denominated in currencies other than their functional currency;the majority of these foreign currency-denominated cash flowsare intra-Group cash flows. Hedging instruments are used toreduce the risks arising from the fluctuations of currencies againstthe exporting and importing companies’ functional currencies,and are allocated to either accounts receivable or accountspayable (fair value hedges) for the fiscal year, or to transactionsanticipated for future periods (cash flow hedges).
Future foreign currency-denominated cash flows are brokendown as part of the budget preparation process and are hedgedprogressively over a period not exceeding one year unless alonger period is justified by probable commitments. As such,and according to market trends, identified foreign exchangerisks are hedged using forward contracts or options.
The Group may also use appropriate financial instruments tohedge the net worth of subsidiaries outside the eurozone, in orderto limit the impact of foreign currency fluctuations against theeuro on consolidated equity.
23.3 Derivatives used to manage interest rate risk
The aim of the Group’s debt management policy is to adapt the debt maturity profile to the characteristics of the assets held, to contain borrowing costs, and to protect net profit from the impact of significant changes in interest rates.
For these purposes, the Group uses interest rate swaps and options.
Derivatives used to manage interest rate risk outstanding as of June 30, 2019 break down as follows:
(EUR millions) Nominal amounts by maturity Market value(a) (b)
Less than From 1 to More than Total Fair value Not Total 1 year 5 years 5 years hedges allocated
Interest rate swaps,floating-rate payer 342 1,996 - 2,338 43 - 43Interest rate swaps,fixed-rate payer - 343 - 343 - (5) (5)Foreign currency swaps,euro-rate payer 92 446 - 538 1 - 1Foreign currency swaps, euro-rate receiver 59 132 - 191 (5) - (5)
Total 39 (5) 34
(a) Gain/(Loss).(b) See Note 1.9 to the 2018 consolidated financial statements regarding the methodology used for market value measurement.
23.4 Derivatives used to manage foreign exchange risk
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 2019 49
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201950
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Derivatives used to manage foreign exchange risk outstanding as of June 30, 2019 break down as follows:
(EUR millions) Nominal amounts by fiscal year of allocation(a) Market value(b) (c)
2019 2020 Thereafter Total Future Fair value Foreign Not Total cash flow hedges currency net allocated hedges investment hedges
Options purchased Put USD 230 - - 230 1 1 - - 2Put JPY - 4 - 4 - - - - -Put GBP 2 - - 2 - - - - -Other - - - - - - - - -
232 4 - 236 1 1 - - 2
Collars Written USD 3,295 4,180 - 7,475 106 (5) - - 101Written JPY 695 1,053 - 1,748 21 - - - 21Written GBP 250 227 - 477 16 1 - - 17Written HKD 362 428 - 790 11 - - - 11Written CNY - 302 - 302 10 - - - 10
4,602 6,190 - 10,792 164 (4) - - 160
Forward exchange contracts USD (50) (77) - (127) 1 1 - - 2HKD (3) - - (3) - - - - -JPY 16 - - 16 - - - - -CHF (78) - - (78) 3 1 - - 4RUB 23 - - 23 - (1) - - (1)CNY - - - - - - - - -GBP 51 9 - 60 2 - - - 2Other 143 - - 143 - - - - -
102 (68) - 34 6 1 - - 7
Foreign exchange swaps USD 2,009 439 (527) 1,921 - (105) 2 - (103)GBP 1,031 - - 1,031 - (4) - - (4)JPY 285 - - 285 - (19) - - (19)CNY (164) 19 11 (134) - (3) - - (3)Other (500) - - (500) - (13) (11) - (24)
2,661 458 (516) 2,603 - (144) (9) - (153)
Total 7,597 6,584 (516) 13,665 171 (146) (9) - 16
(a) Sale/(Purchase).(b) See Note 1.9 to the 2018 consolidated financial statements regarding the methodology used for market value measurement.(c) Gain/(Loss).
24.1 Information by business group
First half 2019
(EUR millions) Wines & Fashion & Perfumes & Watches & Selective Other and Eliminations Total Spirits Leather Cosmetics Jewelry Retailing holding and not Goods companies allocated (a)
Sales outside the Group 2,471 10,387 2,714 2,066 7,072 372 - 25,082Intra-Group sales 15 38 522 69 26 8 (678) -
Total revenue 2,486 10,425 3,236 2,135 7,098 380 (678) 25,082
Profit from recurring operations 772 3,248 387 357 714 (179) (4) 5,295Other operating income and expenses 3 - (8) (8) - (41) - (54)Depreciation, amortization and impairment expense (87) (882) (207) (227) (663) (106) - (2,172)Of which: Right-of-use assets (15) (529) (68) (106) (414) (39) - (1,171)
Other (72) (353) (139) (121) (249) (67) - (1,001)
Intangible assets and goodwill (b) 6,895 13,069 1,381 5,684 3,420 2,850 - 33,299Right-of-use assets 123 5,171 481 1,044 4,900 845 (426) 12,138Property, plant and equipment 2,913 3,895 694 576 1,820 6,336 (9) 16,225Inventories 5,666 2,739 931 1,831 2,716 43 (365) 13,561Other operating assets(c) 1,156 1,635 1,407 761 868 1,310 8,564 15,701
Total assets 16,753 26,509 4,894 9,896 13,724 11,384 7,764 90,924
Equity - - - - - - 35,390 35,390Lease liabilities 127 5,081 469 993 5,019 910 (431) 12,168Other liabilities(d) 1,330 4,233 1,900 1,050 2,593 1,579 30,681 43,366
Total liabilities and equity 1,457 9,314 2,369 2,043 7,612 2,489 65,640 90,924
Operating investments(e) (112) (544) (171) (142) (276) (176) (2) (1,423)
The Group’s brands and trade names are organized into sixbusiness groups. Four business groups – Wines & Spirits, Fashion& Leather Goods, Perfumes & Cosmetics, and Watches & Jewelry – comprise brands dealing with the same category ofproducts that use similar production and distribution processes.Information on Louis Vuitton and Bvlgari is presented accordingto the brand’s main business, namely the Fashion & Leather Goodsbusiness group for Louis Vuitton and the Watches & Jewelry
business group for Bvlgari. The Selective Retailing business groupcomprises the Group’s own- label retailing activities. Other activitiesand holding companies comprise brands and businesses thatare not associated with any of the above-mentioned businessgroups, particularly the media division, the Dutch luxury yachtmaker Royal Van Lent, hotel operations and holding or realestate companies.
Selected notes to the consolidated financial statements
24. SEGMENT INFORMATION
Interim Financial Report - Six-month period ended June 30, 2019 51
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Fiscal year 2018 (f)
(EUR millions) Wines & Fashion & Perfumes & Watches & Selective Other and Eliminations Total Spirits Leather Cosmetics Jewelry Retailing holding and not Goods companies allocated (a)
Sales outside the Group 5,115 18,389 5,015 4,012 13,599 696 - 46,826Intra-Group sales 28 66 1,077 111 47 18 (1,347) -
Total revenue 5,143 18,455 6,092 4,123 13,646 714 (1,347) 46,826
Profit from recurring operations 1,629 5,943 676 703 1,382 (270) (60) 10,003Other operating income and expenses (3) (10) (16) (4) (5) (88) - (126)Depreciation, amortization and impairment expense (162) (764) (275) (239) (463) (169) - (2,072)Of which: Right-of-use assets - - - - - - - -
Other (162) (764) (275) (239) (463) (169) - (2,072)
Intangible assets and goodwill (b) 6,157 13,246 1,406 5,791 3,430 951 - 30,981Right-of-use assets - - - - - - - -Property, plant and equipment 2,871 3,869 677 576 1,817 5,309 (7) 15,112Inventories 5,471 2,364 842 1,609 2,532 23 (356) 12,485Other operating assets(c) 1,449 1,596 1,401 721 870 976 8,709 15,722
Total assets 15,948 21,075 4,326 8,697 8,649 7,259 8,346 74,300
Equity - - - - - - 33,957 33,957Lease liabilities - - - - - - - -Other liabilities(d) 1,580 4,262 2,115 1,075 3,005 1,249 27,057 40,343
Total liabilities and equity 1,580 4,262 2,115 1,075 3,005 1,249 61,014 74,300
Operating investments(e) (298) (827) (330) (303) (537) (743) - (3,038)
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201952
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Selected notes to the consolidated financial statements
First half 2018 (f)
(EUR millions) Wines & Fashion & Perfumes & Watches & Selective Other and Eliminations Total Spirits Leather Cosmetics Jewelry Retailing holding and not Goods companies allocated (a)
Sales outside the Group 2,257 8,564 2,372 1,917 6,302 338 - 21,750Intra-Group sales 14 30 505 61 23 9 (642) -
Total revenue 2,271 8,594 2,877 1,978 6,325 347 (642) 21,750
Profit from recurring operations 726 2,775 364 342 612 (134) (37) 4,648Other operating income and expenses - - (12) (1) - (57) - (70)Depreciation, amortization and impairment expense (75) (355) (130) (112) (221) (92) - (985)Of which: Right-of-use assets - - - - - - - -
Other (75) (355) (130) (112) (221) (92) - (985)
Intangible assets and goodwill (b) 6,551 13,164 1,291 5,737 3,325 984 - 31,052Right-of-use assets - - - - - - - -Property, plant and equipment 2,748 3,700 615 540 1,692 4,874 (7) 14,162Inventories 5,320 2,156 793 1,566 2,359 20 (331) 11,883Other operating assets(c) 1,152 1,300 1,274 694 803 1,113 8,307 14,643
Total assets 15,771 20,320 3,973 8,537 8,179 6,991 7,969 71,740
Equity - - - - - - 31,482 31,482Lease liabilities - - - - - - - -Other liabilities(d) 1,331 3,689 1,785 1,033 2,502 1,394 28,524 40,258
Total liabilities and equity 1,331 3,689 1,785 1,033 2,502 1,394 60,006 71,740
Operating investments(e) (108) (325) (135) (145) (205) (286) - (1,204)
(a) Eliminations correspond to sales between business groups; these generally consist of sales to Selective Retailing from other business groups. Selling prices between the differentbusiness groups correspond to the prices applied in the normal course of business for sales transactions to wholesalers or distributors outside the Group.
(b) Intangible assets and goodwill correspond to the carrying amounts shown in Notes 3 and 4.(c) Assets not allocated include available for sale financial assets, other financial assets, and current and deferred tax assets.(d) Liabilities not allocated include financial debt, current and deferred tax liabilities, and liabilities related to purchase commitments for minority interests’ shares.(e) Increase/(Decrease) in cash and cash equivalents.(f) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of the
application of IFRS 16.
24.2 Information by geographic region
Revenue by geographic region of delivery breaks down as follows:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
France 2,153 4,491 2,057Europe (excluding France) 4,338 8,731 3,863United States 5,784 11,207 5,041Japan 1,810 3,351 1,554Asia (excluding Japan) 8,190 13,723 6,739Other countries 2,807 5,323 2,496
Revenue 25,082 46,826 21,750
Interim Financial Report - Six-month period ended June 30, 2019 53
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Operating investments by geographic region of delivery are as follows:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
France 548 1,054 504Europe (excluding France) 306 539 224United States 191 765 228Japan 55 80 39Asia (excluding Japan) 230 411 141Other countries 93 189 68
Operating investments 1,423 3,038 1,204
No geographic breakdown of segment assets is provided since a significant portion of these assets consists of brands and goodwill,which must be analyzed on the basis of the revenue generated by these assets in each region, and not in relation to the region oftheir legal ownership.
24.3 Quarterly information
Quarterly revenue by business group breaks down as follows:
(EUR millions) Wines & Fashion & Perfumes & Watches & Selective Other and Eliminations Total Spirits Leather Cosmetics Jewelry Retailing holding Goods companies
First quarter 1,349 5,111 1,687 1,046 3,510 187 (352) 12,538Second quarter 1,137 5,314 1,549 1,089 3,588 193 (326) 12,544
Total for first half 2019 2,486 10,425 3,236 2,135 7,098 380 (678) 25,082
(EUR millions) Wines & Fashion & Perfumes & Watches & Selective Other and Eliminations Total Spirits Leather Cosmetics Jewelry Retailing holding Goods companies
First quarter 1,195 4,270 1,500 959 3,104 161 (335) 10,854Second quarter 1,076 4,324 1,377 1,019 3,221 186 (307) 10,896
Total for first half 2018 2,271 8,594 2,877 1,978 6,325 347 (642) 21,750
Third quarter 1,294 4,458 1,533 1,043 3,219 173 (341) 11,379Fourth quarter 1,578 5,403 1,682 1,102 4,102 194 (364) 13,697
Total for second half 2018 2,872 9,861 3,215 2,145 7,321 367 (705) 25,076
Total for 2018 5,143 18,455 6,092 4,123 13,646 714 (1,347) 46,826
25. OTHER OPERATING INCOME AND EXPENSES
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Net gains/(losses) on disposals 3 (5) 3Restructuring costs - 1 -Transaction costs relating to the acquisition of consolidated companies (4) (10) -Impairment or amortization of brands, trade names, goodwill and other property (37) (117) (73)Other items, net (16) 5 -
Other operating income and expenses (54) (126) (70)
Impairment and amortization expenses recorded are mostly for brands and goodwill.
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201954
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Selected notes to the consolidated financial statements
26. NET FINANCIAL INCOME/(EXPENSE)
(EUR millions) June 30, 2019 Dec. 31, 2018(a) June 30, 2018(a)
Borrowing costs (77) (158) (73)Income from cash, cash equivalents and current available for sale financial assets 29 44 18Fair value adjustment of borrowings and interest rate hedges (3) (3) (1)
Cost of net financial debt (51) (117) (56)
Interest on lease liabilities (145) - -
Dividends received from non-current available for sale financial assets 1 18 18Cost of foreign exchange derivatives (102) (160) (68)Fair value adjustment of available for sale financial assets 101 (108) 95Other items, net (9) (21) (11)
Other financial income and expenses (9) (271) 34
Net financial income/(expense) (205) (388) (22)
(a) The financial statements as of December 31 and June 30, 2018 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 regarding the impact of theapplication of IFRS 16.
Income from cash, cash equivalents and current available for sale financial assets comprises the following items:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Income from cash and cash equivalents 21 31 13Income from current available for sale financial assets 8 13 5
Income from cash, cash equivalents and current available for sale financial assets 29 44 18
The cost of foreign exchange derivatives breaks down as follows:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Cost of commercial foreign exchange derivatives (103) (156) (65)Cost of foreign exchange derivatives related to net investments denominated in foreign currency 3 3 2Cost and other items related to other foreign exchange derivatives (2) (7) (5)
Cost of foreign exchange derivatives (102) (160) (68)
27. INCOME TAXES
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Current income taxes for the fiscal year (1,556) (2,631) (1,232)Current income taxes relating to previous fiscal years 5 76 6
Current income taxes (1,551) (2,555) (1,226)
Change in deferred income taxes 90 57 (29)Impact of changes in tax rates on deferred income taxes 30 (1) (9)
Deferred income taxes 120 56 (38)
Total tax expense per income statement (1,431) (2,499) (1,264)
Tax on items recognized in equity 15 118 110
Interim Financial Report - Six-month period ended June 30, 2019 55
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
The Group’s off-balance sheet commitments, which amountedto 18.2 billion euros as of December 31, 2018, decreased by13.5 billion euros in the first half of 2019, including 12.6 billioneuros resulting from the application of IFRS 16 Leases (see Note 1.2)
and 2.0 billion euros following the payment of the acquisitionprice for Belmond (see Note 2), included within share purchasecommitments as of December 31, 2018.
The effective tax rate is as follows:
(EUR millions) June 30, 2019 Dec. 31, 2018 June 30, 2018
Profit before tax 5,036 9,489 4,556Total income tax expense (1,431) (2,499) (1,264)
Effective tax rate 28.4% 26.3% 27.7%
The effective tax rate used as of June 30 is the forecast effective tax rate for the fiscal year.
The Group’s effective tax rate was 28.4%, up 0.7 points from the first half of 2018.
28. EARNINGS PER SHARE
June 30, 2019 Dec. 31, 2018 June 30, 2018
Net profit, Group share (EUR millions) 3,268 6,354 3,004
Average number of shares outstanding during the fiscal year 505,182,367 505,986,323 506,624,444Average number of treasury shares owned during the fiscal year (1,571,270) (3,160,862) (3,807,863)
Average number of shares on which the calculation before dilution is based 503,611,097 502,825,461 502,816,581Basic earnings per share (EUR) 6.49 12.64 5.97
Average number of shares outstanding on which the above calculation is based 503,611,097 502,825,461 502,816,581Dilutive effect of stock option and bonus share plans 943,627 1,092,679 1,286,090Other dilutive effects - - -
Average number of shares on which the calculation after dilution is based 504,554,724 503,918,140 504,102,671Diluted earnings per share (EUR) 6.48 12.61 5.96
29. OFF-BALANCE SHEET COMMITMENTS
Selected notes to the consolidated financial statements
Interim Financial Report - Six-month period ended June 30, 201956
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
Selected notes to the consolidated financial statements
30. EXCEPTIONAL EVENTS AND LITIGATION
No significant exceptional events or litigation occurred during the six-month period.
31. RELATED-PARTY TRANSACTIONS
No significant related-party transactions occurred during the six-month period.
32. SUBSEQUENT EVENTS
No significant subsequent events occurred between June 30, 2019 and July 24, 2019, the date at which the financial statements wereapproved for publication by the Board of Directors.
Interim Financial Report - Six-month period ended June 30, 2019 57
CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS
STATUTORY AUDITORS’ REVIEW REPORT ON THE HALF-YEARLY FINANCIAL INFORMATION
To the Shareholders,
In compliance with the assignment entrusted to us by the Shareholder’s Meeting and in accordance with the requirements of ArticleL.451-1-2 III of the French Monetary and Financial Code (Code monétaire et financier), we hereby report to you on:
• the review of the accompanying condensed half-yearly consolidated financial statements of LVMH Moët Hennessy – Louis Vuitton,for the period from January 1 to June 30, 2019;
• the verification of the information presented in the half-yearly Management Report.
These condensed half-yearly consolidated financial statements are under your Board of Directors’ responsibility. Our role is to expressa conclusion on these financial statements based on our review.
1. Conclusion on the financial statements
We conducted our review in accordance with professional standards applicable in France. A review of interim financial informationconsists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical andother review procedures. A review is substantially less in scope than an audit conducted in accordance with the professionalstandards applicable in France and consequently does not enable us to obtain assurance that the financial statements, taken as awhole, are free from material misstatements, as we would not become aware of all significant matters that might be identified in anaudit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed half-yearlyconsolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 – standard of the IFRS asadopted by the European Union applicable to interim financial information.
Without qualifying our conclusion, we draw your attention to the matter set out in Note 1.2 to the condensed half-yearly consolidatedfinancial statements regarding the effects resulting from the first application of IFRS 16 on lease contracts and IFRIC 23 on uncertaintyover income tax treatments, and changes in the presentation of the balance sheet and cash flow statement.
2. Specific verification
We have also verified the information presented in the half-yearly Management Report on the condensed half-yearly consolidatedfinancial statements subject to our review.
We have no matters to report as to its fair presentation and consistency with the condensed half-yearly consolidated financialstatements.
Paris-La Défense, July 24, 2019
The Statutory Auditors
French original signed by
MAZARS ERNST & YOUNG Audit
Loïc Wallaert Isabelle Sapet Gilles Cohen Patrick Vincent- Genod
Interim Financial Report - Six-month period ended June 30, 201958
This is a translation into English of the statutory auditors' review report on the half-yearly financial information issued in French and is providedsolely for the convenience of English-speaking users. This report includes information relating to the specific verification of information given inthe Group’s half-yearly management report.
This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.
STATEMENT BY THE COMPANY OFFICER RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
We declare that, to the best of our knowledge, the condensed interim consolidated financial statements have been prepared inaccordance with applicable accounting standards and provide a true and fair view of the assets, liabilities, financial position andprofit or loss of the parent company and of all consolidated companies, and that the interim management report presented on page6 gives a true and fair picture of the significant events during the first six months of the fiscal year and their impact on the financialstatements, and the main related party transactions, as well as a description of the main risks and uncertainties for the remaining sixmonths of the fiscal year.
Paris, July 24, 2019
Under delegation from the Chairman and Chief Executive Officer
Jean-Jacques GUIONY
Chief Financial Officer, Member of the Executive Committee
Interim Financial Report - Six-month period ended June 30, 2019 59
Interim Financial Report - Six-month period ended June 30, 201960
Design and production: Agence Marc Praquin
For any information:LVMH, 22 avenue Montaigne - 75008 ParisTel. +33 1 44 13 22 22 - Fax +33 1 44 13 21 19
www.lvmh.com