ordinary general meeting april 26, 2018 · • global brand • culture of innovation • efficient...
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Ordinary General Meeting
April 26, 2018
WELCOME AND OPENING OF THE GENERAL MEETING 2018
FRANÇOIS-HENRI PINAULT
C H A I R M A N A N D C H I E F E X E C U T I V E O F F I C E R
AGENDA AND REGULATORY ISSUES
ÉRIC SANDRIN
G R O U P G E N E R A L C O U N S E L
CONTENTS
Full-year 2017 highlights & financial results analysis
A luxury pure player
Strategy and outlook
Sustainability
Governance
Conclusion
Statutory auditors’ reports
Questions - Answers
Vote on the resolutions
4
INTRODUCTION
FRANÇOIS-HENRI PINAULT
C H A I R M A N A N D C H I E F E X E C U T I V E O F F I C E R
FULL-YEAR 2017 HIGHLIGHTS AND FINANCIAL RESULTS ANALYSIS
JEAN-FRANÇOIS PALUS
G R O U P M A N A G I N G D I R E C T O R
RECORD OPERATING PERFORMANCES IN 2017
* Subject to April 26, AGM approval
GROUP REVENUE
7
GROUP RECURRING
OPERATING INCOMENET INCOME GROUP SHARE DIVIDEND*
in kind
1 Puma share
for 12 Kering
shares held
€15,478m
+25.0% reported
+27.2%comparable**
€2,948m
+56.3%
19.0% recurring
operating margin
up +3.8 pt
€1,786m
+119%
in cash
6.00 € per share
+30%
** at constant scope and exchange rates
€3BN ADDITIONAL REVENUE EXCLUSIVELY GENERATED THROUGH ORGANIC GROWTH
21%growth
+23%
33%growth
+32%
11%growth
+23%27%
growth
+33%
8%growth
11%
North America
Western Europe
Asia-Pacific
Japan
STRONG REVENUE GROWTH
growth at constant scope and exchange rates
RoW
GROUP REVENUESUSTAINED GROWTH
BALANCED ACROSS QUARTERS
LUXURY SHARPLY OUTPERFORMING SECTOR
SPORT & LIFESTYLE STEADY GROWTH
FOCUS ON ORGANIC GROWTH
+28.6%+24.6%
+28.4% +27.4%
T1 17 T2 17 T3 17 T4 17Q1 17 Q2 17 Q3 17 Q4 17
+31.6%+25.3%
+32.3% +30.5%
T1 17 T2 17 T3 17 T4 17Q1 17 Q2 17 Q3 17 Q4 17
+14.0% +14.7%+15.9%
+14.0%
T1 17 T2 17 T3 17 T4 17Q1 17 Q2 17 Q3 17 Q4 17
1,6471,886
2,948
2015 2016 2017
Recurring
operating income
Reported change
(%)
Recurring operating
income margin
(%)
Luxury 2,911 +50.4% 27.0%
Sport & Lifestyle 244 +98.1% 5.6%
Corporate & others (207) -19.7%
Kering 2,948 +56.3% 19.0%
GROUP RECURRING
OPERATING INCOME€2,948m
+ €1BN ADDITIONNAL RECURRING OPERATING
INCOME
19.0%
15.2%
RECURRING OPERATING INCOME AT RECORD LEVEL
1,189
2,318
2016 2017
x1.95
4,371
3,049
2016 2017
- 1,322
In €m
In €m
FREE CASH FLOW €2,318mFCF FROM OPERATIONS
NEARLY DOUBLED
NET DEBT DOWN
BY MORE THAN €1.3BNNET DEBT
Debt-to-EBITDA
ratio at 0.9x
FREE CASH FLOW GENERATION UP SHARPLY,NET DEBT REDUCING
In €m 2017
Reported
change
Revenue 10,796 +27.5%*
Recurring operating income
Recurring operating income margin
2,911
27.0%
+50.4%
+4.1pt
Gross CAPEX
As % of revenue
487
4.5%
+27.9%
+0.0pt
LUXURY ACTIVITIES
2017 Revenue
Reported change
Comparable change
6,211
+41.9%
+44.6%
Recurring operating income
Reported change
2,124
+69.1%
Recurring operating income margin 34.2%
1,176
+0.2%
+2.4%
294
-1.1%
25.0%
1,502
+23.0%
+25.3%
377
+40.4%
25.1%
1,907
+12.3%
+14.1%
116
+1.9%
6.1%
GucciBottega
Veneta
Saint
Laurent
Other
brands
Western Europe
34%
North America
19%
Japan
9%
Asia-Pacific
31%
RoW
7%
REVENUE BREAKDOW N BY REGION
In €m
* Comparable: +29.9%
12
In €m 2017
Reported
change
Revenue 4,382 +12.8%*
Recurring operating income
Recurring operating income margin
244
5.6%
+98.1%
+2.4pt
Gross CAPEX
As % of revenue
131
3.0%
+42.3%
+0.6pt
SPORT & LIFESTYLE ACTIVITIES
Western Europe
30%
North America
27%
Japan
7%
Asia-Pacific
17%
RoW
19%
* Comparable: +14.7%
2017 revenue
Reported change
Comparable change
4,152
+14.0%
+15.8%
Recurring operating income
Reported change
244
+92.7%
Recurring operating income margin5.9%
230
-4.7%
-3.2%
0
+102.9%
0.0%
PumaOther
brandsIn €m
13
REVENUE BREAKDOW N BY REGION
FINANCIAL PERFORMANCE
In €m 2017 2016
Revenue 15,478 12,385
Gross margin 10,133 7,790
Recurring operating income 2,948 1,886
Other non-financial operating income and expenses
Net financial charges
Corporate income tax
Share in earnings of associates
Net result from discontinued operations
(242)
(243)
(591)
(2)
(5)
(506)
(202)
(296)
(2)
(12)
Consolidated net income
Of which net income, Group share
1,865
1,786
868
814
Net income, Group share, from continuing opeations excluding
non-recurring items2,002 1,282
Net income, Group share, per share (in euro)
Net income per share from continuing operations, excluding non-recurring
items (in euro)
14.17
15.89
6.46
10.17
14
2017 BALANCE SHEETHEALTHY FINANCIAL STRUCTURE
-1,197
609 769
700 540
1,628
2 0 1 8 * 2 0 1 9 * * 2 0 2 0 * * 2 0 2 1 * * 2 0 2 2 * * b e y o n d * *
5,1852,137
4,823
5,180
2,943
18,260
12,626
A c t i f P a s s i fA s s e t s L i a b i l i t i e s
Total
€25,577m
• Equity: 49% of total balance sheet
• Debt-to-equity ratio: 24.1%
Current
assets
Non-
current
assets
Cash
Equity
Gross
debt
CONDENSED BALANCE SHEET (In €m) LIQUIDITY OVERVIEW
NET FINANCIAL DEBT (In €m)
Non-current
liabilities
Current
liabilities
* Gross debt minus cash & cash equivalent
** Gross debt15
• Secured financing over the long term
• Optimization of debt cost/maturity
DIVIDEND PER SHARE (excluding distribution in kind of Puma shares)
(In €)
DIVIDEND UP 30%
3.75 3.754.00 4.00
4.60
6.00
2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 *
* Subject to April 26, 2018 AGM approval. Interim payment of €2.00 paid on January 17, 2018
+ 30%
16
Q1 2018 REVENUE: PURE PLAYER DELIVERS SUPERIOR GROWTH
OUT STANDI NG COM PARABL E REVENUE GROWT H ON A CHAL L ENGI NG COM PARI SON BASE
* At constant scope and exchange rates
** For Q1 18, Puma, Volcom and Stella McCartney are treated as discontinued operations (IFRS 5). To reflect this, 2017 figures have been restated of Puma, Stella McCartney and Volcom
(PF = Pro Forma)
KERING
CONTINUING OPERATIONS
Q1 18: €3,108mQ1 17 PF: €2,445m
+27.1% reported
+36.5% comparable*
TOTAL HOUSES
Q1 18: €2,999mQ1 17 PF: €2,352m
+27.5% reported
+36.8% comparable*
CORPORATE & OTHERS
Q1 18: €109mQ1 17 PF: €93m
+16.8% reported
+27.2% comparable*
DISCONTINUED
OPERATIONS**
PUMA:
Q1 18: €1,135mQ1 17: €1,009m
Other:
Q1 18: €106mQ1 17: €120m
+36.5%
Q1 18
% comparable revenue growth
+28.6%
+24.6%
+28.4% +27.4%
+37.0%
+29.7%
+35.7%+33.9%
Q1 17 Q2 17 Q3 17 Q4 17
Kering as previously reported Kering Pure Player (pro forma in 2017)
Source : Nasdaq, performance as of April 25, 2018 at 12:00PM
SHARE PRICE PERFORMANCE
Kering
+118%
CAC 40
+11%
18
KERING SHARE PRICE PERFORMANCE SINCE JANUARY 1, 2017(in €)
Performance in 2017: +84%
A LUXURY PURE PLAYER
JEAN-FRANÇOIS PALUS
G R O U P M A N A G I N G D I R E C T O R
GRADUALLY REFOCUSING ON LUXURY
2008 2017
A European Group of retail companies A global Luxury Group with iconic brands
By
ac
tiv
ity
By
re
gio
nRe
ve
nu
e b
re
ak
do
wn
*
* Excluding « corporate & others »
Redcats
18%
Fnac
23%
Cfao
14%
Conforama
16%
Puma
12%
Luxury
17%
Americas
14%
France
39%
Europe
excl. France
25%
Oceania
1%
Africa
12%
Other countries
11%
Western Europe
33%
Asia-Pacific
35%
North America
21%
Sport & Lifestyle
29%
20
Asia
9%
Luxury
71%
LUXURY, PRIMARY DRIVER OF KERING GROWTH AND PROFITABILITY
Lux ur y Re v enue ( i n € bn)Luxury Recurring operating
income ( in €bn)
Luxury Recurring operating
margin
3.4
10.8
2008 2017
0.8
2.9
2008* 2017
23%
27%
2008* 2017
3.2x
CAGR: 14%3.8x
CAGR: 16%+430bps
* Luxury Recurring operating income and margin excluding corporate costs as then accounted for
at division level21
A BALANCED ENSEMBLE OF COMPLEMENTARY BRANDS
An ensemble of brands at different stages of maturity
2017 data. Bubble size is representative of each brand’s revenue.
Retail including e-commerce.
Gucci
Bottega Veneta
Saint Laurent
Balenciaga
Brioni
AMQ BoucheronPomellato
Watches(Ulysse Nardin,
Girard Perregaux)Qeelin
Num
ber
of D
OS
Retail as of % of revenue
22
KERING: AMONG THE BEST FINANCIAL PROFILES IN THE SECTOR
Income
statement
Cash f low
statement
Revenue 15,478
Recurring operating
margin19.0%
Cash conversion
(as % of EBITDA***)
In €m, unless otherwise stated
66.9%
Balance
sheetNet debt / EBITDA (x) 0.9x
11,326
23.9%
69.7%
1.1x
Kering 2017 reported Pro forma*
Increase in operating
profitability
Stronger cash flow
generation
Recurring operating
income2,948 2,704
Free cash flow from
operations2,318 2,195
EPS attributable to
owners of the parent**€15.89 €14.88
Net debt 3,049 3,402
Moderate increase in net debt,
partly offset by dividend
announced by Puma
A VALUE-CREATING TRANSACTION FOR THE GROUP
1
2
3
* Kering excluding Puma
** Continuing operations excluding non-recurring items
*** Reported 2017 EBITDA: €3,464m, pro forma 2017 EBITDA: €3,150m
SIGNIFICANT INCREASE IN RETURN ON CAPITAL EMPLOYED
23
x3.9
63
245
2013 2017
2,985
4,136
2013 2017
INITIAL SUCCESS OF PUMA FOREVER FASTER PLAN AND RETURN TO PROFITABLE GROWTH
Operating income Market capitalization
• Gradual improvement in
operating margin
• More innovative, differentiating
products: improved gross margin
through better sell-through and
improved sourcing
• Activated operating leverage
Revenue
• Gradual acceleration of revenue
growth
• Renewed, repositioned product
offer
• Sustained, consistent growth
• Increased visibility, partnerships &
sponsorships
• Value creation
• +54.5% share performance since
12/31/2013 (from €235 to €363*)
As reported by Puma SE, in €m
% margin
+39%
2.1% 5.9%in €bn
3.5
5.5
2013 2017
+€2.0bn
* Share price as of 31/12/2017 24
2018: CELEBRATING ITS 70 th ANNIVERSARY, PUMA AIMS EVEN HIGHER
F ive s t ra tegic p i l l ars underp inning i ts per fo rmance…
• Global brand
• Culture of innovation
• Efficient distribution model
• Leading product offer for Women
• Operational excellence
…have es tabl ished Puma as a l ead ing p layer in i t s marke t
• Legitimacy in both Sport Performance and Sportstyle
• Brand heat supported by sports icons and amabassadors
• Innovative and diversified product offer
• Balanced geographical exposure
• Sound distribution setup
Huge untapped potent ia l…
• Re-entering the basketball market
• Development in Asia, particularly China
• Focus on e-commerce and direct-to-consumer
• Innovation and new merchandise core to the product offer
• Improved visibility with new sponsorship and partnerships
• Potential for operating margin expansion
…to ach ieve new ambi t ions
• Medium term outlook (2021/22)
• c.10% revenue growth at constant currency
• Gross margin between 49% and 50%
• Recurring operating income margin around10%
25
Puma
shareholding
Float
14%
Kering
86%
Float
55%
Kering
16%
Artemis
29%
Post-Distr ibutionPre-Distr ibution
TECHNICAL ASPECTS OF THE DISTRIBUTION
Distribution
ratio
Kering shareholders will receive 1 Puma share for 12 Kering shares held
• Shareholders owning a number of Kering shares lower than 12 or which does not correspond to a
multiple of 12 will receive the number of Puma shares immediately below, together with a cash
payment for the balance
• Kering: 6-month period following the distribution
• Artemis: 12-month period following the distribution
Lock-up
commitments
26
INDICATIVE TIMETABLE
Calendar
April 26, 2018 • Annual General Meeting
27
May 14, 2018 (before market)
May 16, 2018 • Payment of ordinary dividend balance
• Delivery of Puma shares
• Start of the process of fractional
shares centralisation, followed by their
sale on the market
Ex-dividend date May 14, 2018 (before market)
Payment of the cash and stock dividends on May 16, 2018
15
Kering share(s)
Kering share(s)
[ex-dividend et
ex-Puma share]
Balance of ordinary
cash dividend(1)
1.25 Puma share(s) (15/12 = 1.25)(2)
[excluding tax and social security deductions]
15
Kering share(s)
€60.00
(15 x €4.00)
1
Puma share(s)delivered
0.25(2)
Fractional sharesettled in cash
+ + +
• Ex-dividend date for cash and stock
dividends
(1) An interim dividend of €2.00 per share was paid on January 17, 2018(2) Potential rounded data
A VALUE-CREATING TRANSACTION
• Raising Kering’s status as a leading Luxury pure player
— Among the best financial profiles in the sector, with higher profitability, strong cash flow generation
and solid financial position
— Ambition to continue growing and developing its powerful ensemble of Luxury Houses
• Exposure to Puma value-creation potential
• Opportunity to become shareholders in one of the world’s most iconic global Sports brands
• Direct benefit from Puma value-creation potential
• Option to keep or monetize shares
For Kering
For Kering
shareholders
28
NEW PROFILE: STRATEGY AND AMBITIONS
FRANÇOIS-HENRI PINAULT
CHAIRMAN AND CEO
EMPOWERING IMAGINATION
CREATION
at the heart of modern,
audacious Luxury
PROMOTE
organic growth
STRENGTHEN
synergies and integration
MULTIBRAND
model based on agility,
balance and sustainability
VISION BUSINESS MODEL STRATEGY
30
CREATIVITY
GUCCI, EXCELLENCE NURTURED BY CREATIVITY
STORE NETWORK
CLIENT EXPERIENCE
COMMUNICATION & MARKETING
PRODUCTS & MERCHANDISING
SUPPLY CHAIN
PRODUCT DEVELOPMENT
PRODUCTION
31
MAJOR ORGANIC GROWTH LEVERS
BOTTEGA VENETA YVES SAINT LAURENT
Determined execution,
encouraging signs
Straightforward strategy
and drivers
32
MAJOR ORGANIC GROWTH LEVERS
Successful creative renewal
Ambitious 3-year investment plan
Multiple strengths,
promising momentum
BALENCIAGA
ALEXANDER McQUEEN
BOUCHERON
33
PERFORMANCE ACCELERATORS
AT THE HEART OF
BRAND STRATEGY
Audacity, creativity
Operational execution
Communications
Sharing of
resourcesSupply chain
Cross-brand expertise, innovation and digital
Talent excellence and best practices
INTEGRATED MODEL
SY
NE
RG
IES
SY
NE
RG
IES
INTEGRATED MODEL
34
VALUE CREATION AND FINANCIAL AMBITIONS
REVENUE
RETURN
FINANCIAL
STRUCTURE
WCR
CAPEX • Enhanced Capex allocation
OPERATIONS
CAPITAL
EMPLOYED
USE OF CASH
• Focus on same-store organic growth
LOWER NET
DEBT/EBITDA RATION (vs. pro forma ratio)
• Higher store productivity
• Ongoing adaptation of organizations
• Net debt cost/maturity
• Dividend a priority
• Planning and inventory management
IMPROVED
RETURN ON
CAPITAL
EMPLOYED
SUSTAINED
GENERATION
OF FCF FROM
OPERATIONS
35
SUSTAINABILITY
MARIE-CLAIRE DAVEU
C H I E F S U S T A I N A B I L I T Y O F F I C E R A N D H E A D O F I N T E R N A T I O N A L I N S T I T U T I O N A L A F F A I R S
OUR SUSTAINABILITY LEADERSHIP CONTINUES TO STRENGTHEN
In 2017, Kering placed first in numerous international rankings
which evaluate the environmental and social performance of
corporations
• Leader of the Textiles, Apparel and Luxury Goods sector of
the Dow Jones Sustainability Index for the third year
• Industry leader of the Textile, Apparel and Luxury sector of
Corporate Knights’ Global 100 most sustainable
corporations index
• The only luxury group listed on the Bloomberg Gender
Equality Index, in recognition of Kering’s commitment to
diversity and women
2017: THE YEAR OF ENGAGEMENT, OF ONE AND ALL
During the course of 2017, we formalized and developed
structural tools to reinforce engagement, both internally
and externally, vis-à-vis our 2025 strategy
• Publication of The Kering Standards, a series of
environmental and social requirements covering all
of the Group’s key raw materials as well as its manufacturing
processes
• Creation of The Kering Planet, an internal digital platform
to engage our employees in sustainability
THE FIRST CONCRETE ILLUSTRATIONS OF OUR NEW STRATEGY
Our actions are continuing and intensifying, across all
three pillars of our strategy: Care, Collaborate, Create
• Creation of a Charter on the working conditions and
well-being of models with LVMH
• Continuation of our commitment to women, notably via
the citizen engagement platform Stop aux Violences
Faites aux Femmes launched by Make.org, and the
#ICouldHaveBeen digital campaign ran by the Kering
Foundation
• Launch of a MOOC (Massive Open Online Course) in
tandem with London College of Fashion in order to
engage and educate future generations about the
importance of sustainability
OUR AMBITION: BECOME THE WORLD’S MOST SUSTAINABLE LUXURY CORPORATION
Our goals may be ambitions, but we are confident in our
capacity to attain them
• By notably furthering the work accomplished in the past
year on the key topics of biodiversity and animal
welfare
• By continuing to question our certainties and our
ways of working, remaining vigilant and aware
• By stimulating innovation so as that it feeds each and
every one of our sustainability initiatives, right across
the business
Committing to sustainable Luxury means
increasing confidence in the future
and empowering imagination
GOVERNANCE
PATRICIA BARBIZET
V I C E CHAIR OF THE BOARD OF DIRECTORS
COMPOSITION OF THE BOARD OF DIRECTORS
11 members, of which 6 independent Directors
43
COMPOSITION OF THE BOARD OF DIRECTORS
11 members, of which 6 independent Directors
44
7 meetings held in 2017 and 3 meetings since the beginning of 2018
Average Director’s attendance rate in 2017: 97%
OPERATION OF THE BOARD OF DIRECTORS
45
February 9
March 10
April 27
April 27
July 27
October 24
December 14
Dates
11/11 (100 %)
11/11 (100 %)
11/11 (100 %)
11/11 (100 %)
11/11 (100 %)
11/11 (100 %)
9/11 (81,8 %)
Directors present(attendance rate)
SUSTAINABILITY
COMMITTEE
• Sapna SOOD (Chairwoman)
• Jean-François PALUS
• François-Henri PINAULT
• Daniela RICCARDI
REMUNERATION COMMITTEE
• Sophie L’HÉLIAS (Chairwoman)
• Patricia BARBIZET
• Sophie BOUCHILLOU
• Yseulys COSTES
• Jean-Pierre DENIS
AUDIT COMMITTEE
• Jean-Pierre DENIS (Chairman)
• Patricia BARBIZET
• Laurence BOONE
• Sophie L’HÉLIAS
APPOINTMENTS COMMITTEE
• Patricia BARBIZET (Chairwoman)
• Laurence BOONE
• Yseulys COSTES
• Baudouin PROT
• Sapna SOOD
Degree of
independence:
60%
Degree of
independence:
75%
Degree of
independence:
75%
Degree of
independence:
50%
4 SPECIALIST COMMITTEES
BOARD OF DIRECTORS
46
COMPONENTS OF THE REMUNERATION OF THE CHAIRMAN & CEO AND OF THE GROUP MANAGING DIRECTOR IN 2017
E x - p o s t vo t e …
Fixed remuneration
Variable part (as a percentage of the fixed annual remuneration):
Directors’ fees
No golden parachute and no indemnity relative to non-compete clause, no supplementary pension scheme
Current operating income (35%)
Free cash flow from operations (35%)
Financial targets Non-financial targets
Organisation and talent management (10%)
Corporate social responsibility (10%)
Sustainability (10%)
47
COMPONENTS OF THE REMUNERATION OF THE CHAIRMAN & CEO Ex-post vote
48
Payable for the fiscal year
2017 2016 2015
Fixed 1 200 K€ 1 100 K€ 1 100 K€
Annual variable 1 944 K€ 1 407 K€ 1 159 K€
Directors' fees 142 K€ 117 K€ 127 K€
Other benefits 6 K€ 17 K€ 19 K€
TOTAL 3 292 K€ 2 641 K€ 2 405 K€
KMUs granted 10 471 KMUs 9 526 KMUs 11 153 KMUs
KMUs exercised ** 9,900 KMUs granted in 2014 exercisable since April 2017 0 0 0
COMPONENTS OF THE REMUNERATION OF THE GROUP MANAGING DIRECTOR Ex-post vote
(1) Data restated with the 2016 exchange rate to provide information at comparable exchange rate
(2) Data restated with the 2015 exchange rate to provide information at comparable exchange rate
49
Payable for the fiscal year
2017 2016 (1) 2015 (2)
Fixed 1 182 K€ 1 100 K€ 1 100 K€
Annual variable 1 586 K€ 1 407 K€ 1 159 K€
Directors' fees 185 K€ 117 K€ 127 K€
Other benefits 1 089 K€ 17 K€ 19 K€
TOTAL 4 042 K€ 2 641 K€ 2 405 K€
KMUs granted 7 196 KMUs 8 448 KMUs 9 758 KMUs
Exceptional remuneration 5 000 KMUs 0 0
KMUs exercised** no KMU exercisable in the fiscal year 0 0 0
2018 REMUNERATION POLICY OF THE CHAIRMAN & CEO AND THE GROUP MANAGING DIRECTOR Ex-ante vote
Maintain the remuneration policy applied in 2017
• Fixed remuneration
• Annual variable remuneration
• Multi-annual variable remuneration
• Other remuneration
• Exceptional remuneration of KMUs: 10,000 for the Chairman and CEO
and 6,000 for the Group Managing Director
50
CONCLUSION
FRANÇOIS-HENRI PINAULT
C H A I R M A N A N D C H I E F E X E C U T I V E O F F I C E R
STATUTORY AUDITORS’ REPORT
FREDERIC MOULIN
S T A T U T O R Y A U D I T O R D E L O I T T E
CONTENTS
Report on the company financial statements
Report on the consolidated financial statements
Other reports issued by the Statutory Auditors:
Special report on regulated agreements and commitments with third parties
Statutory auditors’ report on the pro forma financial information relating to the year ended December 31, 2017
Kering S.A. company financial statements certification without comment (pages 351 - 354 of the Reference Document)
• In accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (Code de Commerce) relating to the justification of our
assessments, we bring your attention to the key audit matters relating to risks of material misstatement that, in our professionnal judgement, were of most significance
in the audit of the financial statements of the current period, as well as ou responses to those risks :
• Valuation of long-term investments the gross amount of investments is compared to their value in use for the company .
• In order to assess the reasonableness of the value in use estimates of long-term investments, based on the information communicated to us, our work mainly
consisted in:
- verifying that the estimate of values in use determined by Management is based on a on appropriate justification of the valua tion method and the figures used;
- verifying the calculation of revalued shareholders’ equity, specifically of Sapardis, subsidiary of KERING SA with shareholdings in PUMA. This calculation of
revalued shareholder’s equity is based on Puma’s shareprice.
• We attest that the Board of Directors’ report on corporate governance contains the information required by Articles L. 225 -37-3 and L. 225-37-4 of the French
Commercial Code (Code de commerce).
• We have no matters to report as to the fair presentation and the consistency with the financial statements of the information given in the management report of the
Board of Directors and in the other documents addressed to shareholders with respect to the financial position and the financ ial statements.
REPORT ON THE COMPANY FINANCIAL STATEMENTS(Resolut ion 1)
Kering Group consolidated financial statements certification without comment or qualification (continuation) (pages 328 - 333 of the Reference Document)
• In accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (Code de commerce) relating to the justification of our assessments,
we bring your attention to the key audit matters relating to risks of material misstatement that, in our professional judgmen t, were of most significance in the audit of
the consolidated financial statements of the current period, as well as our responses to those risks.
• Impairment tests on goodwill and intangible assets with indefinite lives The CGU or groups of CGU holding goodwill and/or intangible assets with indefinite lives,
such as certain brands, are subject to yearly impairment tests.
• We have carried out a critical review of the methods implemented by Management to determine the recoverable amount of goodwil l and intangible assets with
indefinite lives.
Our procedures consisted in:
— assessing the principles and methods of calculating recoverable amounts;
— assessing the consistency of cash flow projections with respect to Management assumptions and the economic environments in wh ich the Group operates and
the consistency of the growth rates adopted for projected cash flows with available external analyses;
— assessing the reasonableness of discount rates applied to estimated cash flows by verifying notably that the different parame ters comprising the weighted average
cost of capital (WAAC) of each CGU enable the return expected by market participants for similar activities to be reached;
— assessing the royalty rates applied to brands in the calculation of future revenue;
• Valuation of inventories inventories are valued the lower of cost determined and net realizable value.
Our work mainly consisted in :
— assessing the data and assumptions adopted by Management to determine the prospects for inventory turnover and the resulting provisions;
— analyzing the budget data and outlooks having an impact on the provisions for inventory allowance;
— assessing the assumptions and application methods adopted to determine specific provisions.
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS(Resolut ion 2)
Kering Group consolidated financial statements certification without comment or qualification (continuation) (pages 328 - 333 of the Reference Document)
• Strategic partnership agreement with the Richemont Group. The Richemont Group has acquired a minority stake in Kering Eyewear which has notably
integrated in its activities the Manufacture Cartier Lunettes (MCL) entity in France, which was consolidated in the second ha lf of 2017. The accounting impact
of this strategic partnership agreement on the Group’s financial liabilities is based partially on Management estimates.
Our work mainly consisted in:
— assessing the accounting treatment adopted by the Group to account for this strategic partnership agreement, notably with reg ard to transactions with
non-controlled interests and the integration of MCL through a business alliance;
— assessing the consistency of Management’s estimates entering into the scope of the valuation of other financial liabilities w ith respect to put options
granted to non-controlling interests as part of the strategic partnership agreement.
• The Group’s operations are subject to regular verifications by the tax administrations in each of the countries in which the Group’s different subsidiaries
operate. These tax audits can result in tax reassessments and litigation with the tax administrations The estimate of the impacts of these tax risks and the
related provisions, recorded if necessary, require Management to make significant judgments, notably to assess the outcome of the litigation underway or the
probability of the occurrence of identified risks. We have therefore considered these items to be a key audit matter.
Our work mainly consisted in:
— analyzing the responses of these tax advisors to our requests for information or the analyses that these advisors produced as part of litigation currently
underway;
— carrying out a critical review of the estimates and positions adopted by Management;
— Concerning contingent liabilities, we have, examined the procedural elements and/or the legal or technical opinions provided by law firms or outside
experts chosen by Management to assess the merits of an absence of a provision.
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS(Resolut ion 2)
Special report on regulated agreements and commitments with third parties (pages 355 - 356 of the Reference Document)
• The support agreement for services provided by Artémis SA, authorized in previous years and that is continuing in the current exercice, is presented in our special report
• We inform you that we have not been advised of any agreement or commitment authorized during the year subject to the approva l of the Shareholder Meetings.
Statutory auditors’ report on the pro forma financial information relating to the year ended December 31, 2017 (Page 362 of the Reference Document)
• On 11 January 2018, Kering’s Board of Directors unanimously proposed to submit to its shareholders the project to distribute in kind of PUMA SE shares aro und 70.4%
of the total of shares outstanding;
• The Kering Group has prepared pro forma financial information to present an economic view of the Group reflecting the future loss of con trol over Puma following
the distribution of this dividend in kind.
• The professional guidelines we have emphasized on, have mainly consisted in :
— verifying that the bases on which the pro forma financial information has been prepared is consistent with the relevant sourc e documents described in the notes;
— reviewing the probative elements substantiating the pro forma restatements;
— conducting interviews with the Senior Management of Kering SA to obtain information and explanations which we deemed necessary;
• To conclude, the pro forma financial informations have appropriately been established regarding the bases in compliance with the accounting methods of Kering.
OTHER REPORTS ISSUED BY THE STATUTORY AUDITORS
QUESTIONS - ANSWERS
VOTE ON THE RESOLUTIONS
FIRST RESOLUTION
Approval of the parent company financial statements for the fiscal year ended December 31, 2017
60
SECOND RESOLUTION
Approval of the consolidated financial statements for the fiscal year ended December 31, 2017
61
THIRD RESOLUTION
Appropriation of net income for 2017 and setting of the dividend
Dividend in cash of €6
Dividend of €4 paid on 16 May 2018
In addition to the interim payment of €2 paid on
17 January 2018
Dividend in kind
Exceptional distribution to all shareholders:
• 1 Puma share for 12 Kering shares
• In the event that fewer than 12 Kering shares are
held, or a number which is not a multiple of 12:
cash payment corresponding to the balance
Payment on 16 May 2018
62
FOURTH RESOLUTION
Renewal of the term of office of Yseulys Costes as a Director
63
FIFTH RESOLUTION
Renewal of the term of office of Daniela Riccardi as a Director
64
SIXTH RESOLUTION
Approval of the remuneration paid or awarded to François-Henri Pinault, Chairman and Chief Executive Officer, for
the fiscal year ended December 31, 2017
65
SEVENTH RESOLUTION
Approval of the remuneration paid or awarded to Jean-François Palus, Group Managing Director, for the fiscal year
ended December 31, 2017
66
EIGHTH RESOLUTION
Approval of the principles and criteria for determining, allocating and awarding fixed, variable and exceptional
components making up total remuneration and benefits in kind granted to François-Henri Pinault, Chairman and
Chief Executive Officer
67
NINTH RESOLUTION
Approval of the principles and criteria for determining, allocating and awarding fixed, variable and exceptional
components making up total remuneration and benefits in kind granted to Jean-François Palus, Group Managing
Director
68
TENTH RESOLUTION
Authorisation to be given to the Board of Directors to trade in the Company’s shares
69
Autorization Resolution number Term of authorization Conditions
Share buy-back
Outstanding
(April 2017)
18 months
(October 2018)
Maximum purchase price: €320
Maximum of 10% of the share capital
10th resolution
Ad of April 26 2018
18 months
(October 2019)
Maximum purchase price: €480
Maximum of 10% of the share capital
ELEVENTH RESOLUTION
Powers for formalities
70
Ordinary General Meeting
April 26, 2018
