Good evening, ladies and gentlemen. Thanks for joining us to attend this annual meeting of presentation of the results of LVMH and followed following my overview, Jean Jacques Guillenie will give you a presentation of the figures in greater detail. I'm sure that is of interest to you. And then we'll take questions if there are any. So in 2014, the group's net profit has reached a record also in terms of sales and distribution.
And we can say that 2014 was a good vintage for the Groupe LVMH. The global economic climate was characterized by a good growth level throughout the world, but mixed effects On the currency front, we were impacted adversely by the currency trends as you'll see in a moment. There was a change during the year. And in the second half, the euro managed to decline, which hadn't happened for a number of years. And this made our products more competitive.
And for French exporters in general, it was very buoyant. Furthermore, the economy at the end of the year was somewhat boosted by 2 factors the drop in the price of oil and more recently by the injection of liquidity into the European economy. So this business climate in 2014 was marked by some less positive effects currency developments, the geopolitical situation in China that I'll return to and also the geopolitical situation in Russia which has consequences given that purchasing power the ruble has dropped. You're all familiar with that. In spite of that, we've seen a significant increase in revenue.
We have topped the €30,000,000,000 revenue mark for the first time. Net income has reached a record level. We can't expect perhaps that to continue every year, but let's make the most of it with the 2014 figures. Profit from recurring operations has trended in light of the currency effect that impacted adversely the bottom line by some €250,000,000 as Jean Jacques will explain. And this the Chinese geopolitical situation which impacted the results of cognac.
Mr. Neuvel perhaps tell us a word about that through destocking in distribution and the duty free shoppers group that was impacted by that situation in China and the subsequent sharp slowdown that followed in Macau and Hong Kong 2 major centers for DFS. In spite of that, the results reached record levels for the group. The financial situation is particularly strong with a gearing ratio of some 20%. If we review now the various business segments, China adversely impacted the Cognac operations.
The Cognac business responded rapidly because it distributed some of the stocks that were bound for China to other countries, but that doesn't prevent the results that you'll see for this business segment. In China, business grew well, but cognac hurt the business as a whole and we maintained sustained CapEx notably in production. On fashion and leather goods, we can say that Louis Vuitton has encountered excellent response to Nicolas Guestier. He arrived in 2014. The first show was held in March and there were 2 subsequent show and these collections accompanied by a number of accessories, leather goods, etcetera met with an excellent response.
And some of the products indeed were not delivered owing to a shortage of production capacity. But Vuitton's profitability held up at the excellent level as it has over the past few years. And we saw a very favorable development in tombs of new products. And then Laurent Pienaar that was integrated this year. An example of integration of a family business in the group, Laurent Pernard still holds a 20% stake and its sales have risen and the quality of the products remains outstanding.
Cashmere products in Vigona, the finest wool products. Loro Piana is experiencing excellent business as well as Fendi and the other brands of the fashion group run up by Mr. Roselle is doing well as well as Celine and Givenchy experiencing strong success and we're currently redeploying Marc Jacobs and Donna Curran. Perfumes and Cosmetics a good year delivered there in particular Christian Dier experiencing strong success with its iconic line J'adore, Miss Dior and Dior Home and plans to increase them in Diormont to arrive one day at a global leadership position in perfumes worldwide. We're our most leader with in makeup and we're also developing skincare considerably.
In other brands Guerlain experienced strong success with Lapitre Robe Noir. And Benefit a U. S. Brand that we acquired some 10 years ago is expanding well in makeup and it's now number 1 in the U. K.
Turning to Watches and Jewelry. Well, 2014, we experienced strong success with Bvlgari in particular both the watches the watch shown here which is the Lucia watch, a new watch designed by the Bvlgari teams and is off to an excellent start, notably in the stores owned by Bulgari and new lines launched in jewelry encountering considerable success. For TAG Heuer, this is what somewhat adversely impacted the operating profit of this activity. We're redeploying it. We're in redeployment phase in terms of the product range and distribution and it's Jean Claude Bivert who's heading that up.
We're very confident for the future, but it did lead to some one shot costs during 2014. Selective retailing, we must acknowledge the excellent success of Sephora here, which is experiencing double digit profitable organic revenue growth. We've opened new countries Australia and Indonesia in 2014. And in all countries where we're present, we're gaining market share. We're far and away number 1 in France.
We cosmetics in the United States. So strong potential there in this business that delivered well in 2014. On the other hand, DFSA in spite of very effective management in terms of containing operating costs, They were in the area of the world that were adversely impacted by developments in China and both in Hong Kong and Macau that are 2 of the prime regions, it was more challenging and that explains why the results were adversely impacted by that situation. For 2015 NAPS, well I believe the economic situation that prevailed at the end of last year is set to continue. That is a relatively competitive euro commodity prices that will be that will trend far lower.
Global growth of the order of 3%, Continued growth on the U. S. Market that's very significant for us. Russia, we don't quite know how things are going to develop there. We can perhaps expect for it to remain more or less in the present situation.
China, some say China is experiencing a slowdown. Growth forecasts are of 6%, 7%, which isn't bad. Given the problems that we encountered both on the consequences of developments in China and the consequences stemming from currency slides. On the macroeconomic front as regards our business, we're in a situation of relative rebound. For currencies that's fairly obvious.
And in China, we're adapting. Konyak's adapting for the other activities Ditto. And so we're relatively confident regarding the trend of global business in 2015. Having said that, what's important for us and what really is the source of our confidence is the word desire. The group sets itself as being the group that creates desire in its customers.
And that is our number one objective far more than revenue, results, profitability that stem from this desirability. And this pushes us in all our businesses to seek to create new products, new concepts or new ways of interacting with our customers. Notably for the flagship brands such as Ouivita, we will continue to offer creative products, but products whose quality is exceptional. It's this combination of quality, creativity, the timelessness I would say and modernity that for many years now and still the case today and in the future will be the success of the Louis Vuitton brand. For this we have a great many plans with Nicolas Ghesquiere with Delphine all those who are in charge of new products.
I won't describe them all to you here, but we have a great many ideas. You'll no doubt have seen at the end of last year all the products that we created around the monogram, which is an iconic product. The monogram is absolutely amazing. It's a mythical product, a product which at the same time is lasting and modern and one never tires of it. It's like the blue sky.
When you see the blue sky, you're immediately optimistic and you want it to last. And the monogram fabric is the same principle, but it needs to get it to evolve from time to time. A cloud passes and that makes it fun. We've done that with the 5 designers who worked on the monogram at the end of last year with considerable success. Everything's out of stock.
I mean, it's quite surprising. We did a case with Cindy Sherman, the great photographer. It's an absolutely amazing case and limited issue, which costs nevertheless €130,000 Well, this case was sold out in a fortnight. I wasn't even able to buy one. I wanted to get 1, but I was too unable to acquire 1.
This really just to give you a sense of the strength of this fabric. There are many other brands that have fabrics. This is mythical and our goal is to nurture it to develop it. And at the same time, we've developed and created a whole series of iconic products with leather, with noble materials, with exotic leather. I won't go into the details of all Vuitton products, But we're extremely confident in our ability in 2015 to deliver to create desirability on the part of our customers with all the new products that we will place on the market.
It goes for Vuitton and many other brands. I won't go into the details of all our plans, because it would take all evening. So aside from this fundamental tenet of creativity and desirability, it's key to continue a search quest for quality at every level which is the other key pillar that contributes to the group's success to sustain the agile entrepreneurial spirit of our teams. You have here the leaders of a number of our businesses. LVMH is an ensemble of companies managed quite independently managed by entrepreneurs who field the owners of their companies and from varying in sizes from the start up, we have a few start ups to the very large company with thousands of employees.
So this entrepreneurial spirit, which allows us to attract the best talents in the market both from the creative and managerial standpoint. It's one of our strengths and that's why we are confident for 2015. And lastly, against the backdrop of a business climate that varies from country to country, rigorous cost containment, well that's straightforward will be continued. That's why we're confident in for 2015. Over now to Jean Jacques Guillenie to review the financials in greater detail.
Good evening. A few words then about the numbers for 2014 starting with revenue and then we'll look the income statement, the balance sheet and the cash position. So there are numbers there are quite a few numbers on this, but if we look at the sales, the revenue on quarterly basis, three things to remember. Organic growth, the dark blue is 5% in H1 and almost and 5 percent the following quarters and 5% for the year as a whole. So not much change in organic growth about 5% on a constant basis.
The foreign exchange effect was strongly negative in H1 minuteus 4%. You may remember you find this on the table, but this reversed. And in Q4, it was positive up 2%. And so all in all, the negative effect is 2%, but still the overall effect is minus 2%. It's going the right way.
And then the third point, we consolidated the Loro Piana this year for the first time. This operation was concluded legally last year. I mean it was it started in 2013, but it was end 2013. And so in 2014, you have Loro Piana's contribution to revenue about 3%. Now if you look at the breakdown of revenue on by region, it's pretty straightforward.
U. S. About 25% onefour of our revenue, it's going up and you expect some more growth. But it's not just mechanical growth because that is the region which enjoyed the best the highest revenue throughout 2014. You can see this on this table.
So you were familiar with the numbers and that's why I have them here. Q4 added or made its own contribution. The U. S. Q4 was very good 13%, double digit growth mostly whites and spirits, excellent quarter for Wines and Spirits, especially Cognac in the U.
S. Also Fashion and Leather Goods and selective rietling and Zephyr did extremely well in Q4. So the United States sustained double digit growth, especially compared to 20 13. Japan was pretty good. I mean, you may remember I think there was a hiccup at the beginning of the year with an increase in VAT in April.
Q2 was under pressure 11% for the first half of the year. But the second half especially Q4 did well and there was a tourist purchasing in Japan. That was rather new to do with the currency effect, but a positive development in Japan. And so overall 8% growth for the year. Asia as a whole is without including not including Japan is a contrasted picture minus 1% for the year as a whole.
Wides and Spirits, especially Cognac as Mr. Arneo said made a significant difference especially in China because in China there was a negative development. But outside Wides and Spirits growth would have been plus 4% as a whole. And I'm not sort of playing down this effect, but I mean it was mostly the wines and spirits that made almost 5% difference. Europe as a whole, modest growth 3%, still significant growth at year's end, 5% in Q4 2014, mostly driven by Fashion and Leather Goods, but also Selective Retailing, which was under pressure.
Sephora had a difficult year beginning of the year with competition in particular, but ended the year brilliantly especially here in France. If you move on to the next slide, revenue by business group, we have again a contrasted picture, but also within each business, Wines and Spirits to start off organic growth. I'm only looking at organic growth here low indeed minus 3%. But you can see a significant difference between champagne up 6%, Goodyear 4% in volume 3% to 4%. And then there were price increases and mix effect was positive.
So all in all, a very favorable development at +6%. A negative development for cognac. Although the volumes are up, up 2% on volumes, but the mix effect because we sold more of Versus and much less VSOP and XO, so a negative price effect. Crushing net of goods plus 3% and the year ended well. Again, a contrasted picture, but less so than in other businesses.
Perfumes and Cosmetics doing well. 7% was difficult to work out on a global basis, but a few percentage points is always good. And Christian Dior did extremely well, eau fresh as well. Watches and Jewelry is a bit more complicated. We'll look at the details on a quarterly basis, but the numbers are driven down by buybacks of products that were sold at the end of the year to clean out retailing, especially at TAG Heuer.
So that had a negative effect on the trend as a whole, but there was a big contrast between watches or TAG Heuer and Bulgari. Bulgari had a splendid year. Well, high performances in jewelry. Nothing new there because it was already the case last year, but outstanding performance in watches for Bulgaria. And that is good news because it means that all the efforts that were made in terms of new products and marketing starting to bear fruit.
Selective retailing, Sephora did quite well, but EDFS ADFS, sorry, had some negative some headwinds, especially in Macau, Hong Kong, China. Travel retailing was under pressure. Most of the drivers for DFS was in the red last year. So, our performances as a result were down too. So that's the revenue.
Let's focus briefly on Q3, Q4. I mean, you know about Q3, but let's take a closer look at Q4. Wines and Spirits had a much better performance, especially in the U. S, but not just the United States. Performance was much better in Q4 than the rest of the year.
Fashion and Leather Goods, thanks to Europe and the U. S, had a better performance again in Q4 than Q3. Perfumes domestic high performance. Watches and Jewelry, they were, as I said, products well, products buyback means negative revenue. I mean that has of course a negative effect on revenue.
And but Selective Riggling had a stable retailing sorry had stable growth for the year and indeed for the last two quarters. If you look at the income statement well you know the numbers, but gross margin is slightly under pressure. I mean, up 4% whereas revenue is up 6%. So you had some pressure there, mostly currency foreign exchange effect. Foreign exchange had a negative effect on gross margin.
Marketing and selling expenses up 9%. There's some scope effect. Without the scope effect and foreign exchange, we would stand at about 7%. This includes selling expenses up 9%, but marketing expenses up 6%. Of course, deliberately we decided to continue investing behind our brands in terms of advertising.
General and administrative expenses up 6 percent on a like for like basis. The number is slightly better at the end of the year. There were some provisions made at the end of the year, which drove down well added G and A, but that enabled us to face a number of situations. So it did add up in the end. I hope we come up with a better figure in 2015.
So all in all, profit from recurring operations down 5% and operating profit down lost to 100 basis points. But if you look at other Operating income expenses, euros 284,000,000 including €44,000,000 in restructuring costs and then €240,000,000 on the sales of some assets. We felt that there were profits made on Hermes. And so we wanted to clean out some of the assets that were held to sale that we were normally that would be staggered over several years. And so we were able to wind up a number of depreciations.
So that's why you have instead of we have an additional €150,000,000 on depreciation more than in 2013. And this is of course non recurrent. This enabled us to clean out some of these old assets. If you look at net financial income, we'll have a picture a slide on just that. So I'll comment it later.
Income taxes about 27% compared to 32% last year. It stands at €2,273,000,000 That's because the Hermes operation well had less was less heavily taxed than the other operations. And so without Hermes, in fact, the tax rate is about the same as last year. Minority interest down and that's because of Moten C and Hermes. So we have a group share of net profit at €5,600,000,000 up 64% and has a but it has you have mostly the €2,700,000,000 due to the Hermes operation.
If you look at the profit from operations by business group, Wides and Spirits down 16%. There was of course destocking in China, but the foreign exchange effect for some of the sales denominated in foreign currencies. There were also some hedging effects which were less favorable last year than last year. So all in all, we have a revenue down a profit down, sorry, 16%. Fashion and Added Goods of the foreign exchange effect also accounts for this lesser performance than that of revenue.
Likewise for perfumes and cosmetics, there was also some restructuring. By the way, there were some businesses in Fashion and Leather Goods being restructured. And so restructuring costs had some effects on revenue. But of course, some it seemed necessary to do this even though this is probably not the best time to do this. But over the long run, it will be worthwhile.
Watches and Jewelry contrasted picture. TAG Heuer, we had a complete reorganization of the business. We simplified its production process. Phones and other chronographs. We decided to do away with that and there were some commercial restructuring buying back some products precisely with a view to give a better availability of funds for TAG Heuer products to be sold to retailers.
So but of course, the one thing you should remember is that Bergari had enjoyed significant improvement both in revenue and profit. Selective retailing a contrasted picture. Sephora did well double digit growth in operating profit, but of course it was driven down by DFS. DFS had less revenue and the well the operational effect was negative. That is always the case in DFS well in retailing.
The fixed expenses are constant and so they have a negative effect on profit. The scope effects should be seen here on the next slide. Loro Para made all the difference €125,000,000 The currency effect, now that includes the foreign exchange effect in the various subsidiaries and also the hedging policies, so double negative there. The sales to our subsidiaries and conversion of foreign denominated sales had a negative effect. But then the hedging effect had a positive effect, but not enough to compensate for the 2 first factors.
So the currency effect is almost 25% of the current the profit from recurring operations, so a significant number. The financial income, again, there was something of an offset. We start with the cost of net financial debt, up €14,000,000 from €101,000,000 to €115,000,000 The Loro Parana well, the debt increased but the interest rates came down. So the cost of debt was about up 15%. The ineffective portion of foreign currency hedges moves sometimes 1 year, sometimes another.
The real explanation, I'm not sure it's completely understandable. But what you recognize in this line is the cost of our foreign currency hedges. It's not a cash cost. It's a bait on the cash value of the derivative that we use for hedging. And so as early as 2014, we recognized the cost for the hedges for 2015.
At the end of 2013, 60% of the cost of hedges for 2014 were already recognized Because the euro came down, 98% of the cost of the currency hedges were recognized in 2014 for 2015. So that's why you have such a bloated number here. There's not much else you can do with that. The 3rd big line of course is the gains related to the sale of assets held for sale. There was of course Hermes where we distributed Hermes shares to our own shareholders and that accounts for this big number here.
And so that means why there is such a significant difference in the net financial income. The financial structure also reflects the Hermes operation because the distribution of Hermes shares meant that equity was down €6,900,000,000 But all things being equal, it doesn't mean that we have less money. There were €2,700,000 in the cost, but there was a capital gain of €4,000,000 So if you compare it to the situation where we had not invested in Hermes, the cost would only be €2,000,000,000 as opposed to €6,000,000,000 because of course there was this €4,000,000,000 in capital gains. Our rating was confirmed at A plus even though the net debt of the group came down. Cash flow and you have it on this slide.
The net cash flow from operations before changes in working capital is down only about 9%. You have lots of provisions in the operating profit. So cash flow net cash flow diminished less than operating profit. We paid less taxes last year. And so the net cash flow hasn't changed even though the cash before interest and income tax was down 200 percent.
€200,000,000 I beg your pardon. And so we end up with free cash flow at 2.832, 1 of the best performances ever even though it's slightly less than last year. So as I said, that meant debt was down. You see on the dark bars, debt was down from €5,300,000,000 to €4,800,000,000 reduction in the debt level. We have €2,000,000,000 in dividends, €1,600,000,000 to LVMH and €1,300,000,000 to Boitancy and DFS, Robert Millet minority shareholders, so 800, 200, 150 were absorbed by acquisitions, various acquisitions, Gruy, Hombre.
There were not that many. And so we were able to bring debt down by €500,000,000 And so you have the new numbers. All the same debt is only 21% of equity. And finally, dividend, we suggested a 3% increase from €3.1 to €3.2 per share. And that means that we have a 3% increase compared to last year.
That's what I had to say for the year as a whole.
Ladies and gentlemen, we're available to take your questions. Kindly introduce yourself before you ask your question. Good evening. HSBC, three questions. Rui, Vuitton, you mentioned clouds that had cleared.
What remains to be done as you see it to return to higher growth levels possibly in terms of products or distribution? 2nd question on cognac. On one slide, you're expecting a rebound of VSOP in China in 2015. What about the more lucrative qualities for the group? What are your current inventory levels in the various distribution sectors in China?
When are you expecting this rebound? Margins have been heavily squeezed. Is that the disappearance of a bubble? And is this going to be the new standard going forward? Or can we expect a rebound of the margin in cognac?
Currency effects expected to fluctuate a good deal this year. Surprised to see you didn't benefit from the weakness of the euro in Q4. Mr. Guillen said that there was a simple optional hedge. So you should have been able to lock that in and benefit from it.
So how can you model the impact in 2015? The other impact in the slide in the euro as of today Louis Vuitton Bank costs 39% more in Hong Kong than in Paris. How are you going to address these key pricing issues? Well, your first question on Louis Vuitton. Well, on Louis Vuitton, you mentioned clouds.
I mean, I mentioned clouds in a blue sky that is in the monogram canvas. I mean there were some drawings. It was evocative. It wasn't clouds on Vuitton's development. On the contrary Vuitton is performing very well.
But our objective with Vuitton is with many other brands as I indicated earlier is to increase the desirability of our products not necessarily more revenue or more profitability. I'm not saying there won't be any, but you must view this as a consequence and not an objective. And it's very particular ventures where of course we're trying to sell. But that's not the objective is to elicit desirability from customer with quite a wide range of competitors to offer them products that elicit the greatest desirability with constant creativity. If you've visited the store next to the entrance to this building, you'll see that we really are trying to bring in new developments in that front where we're quite successful.
So it's quite probable that it will boost sales. In fact during the 1st month of this year Vuitton's results are sharply up. Up. But I mean it's almost too much. We need to be prudent.
And in any event, we won't be able to deliver all the goods. I don't derive any conclusions for the year. The new products are arriving on the basis of our production capacity. I'm very confident regarding the development of Vuitton for the next 15 years. Our objective is in always capable of surprising all its customers and all those who view and who follow Vuitton's designs.
As regards Cognac, Christophe Navin will give you a more detailed answer. Well, just to return briefly to 2,040, we saw that it was there's a China impact and China so Chinese New Year in 2014 not good. That's the first point. 2nd point what we saw an acceleration of anti corruption measures in China and that was widely commented in the press. And that means a shutdown of closure of nightclubs where our products were distributed.
So accounts receivable up sharply and so stock levels increasing and actions in March April to measure the impact of these inventories in the distribution sector and to begin to destock. This started the destocking started in April picked up during the Q2 and the latter part of the year. So China impacts the industry as a whole. What's going to happen is since we've begun to destock as of Q2 2014, we're going to have still a rather challenging quarter, Q1 in 2015. And then there'll be the positive effect, the rebound at least towards the end of Q2 and most certainly and considerably in the second half of the year.
Having said that, when we look I mean it's no excuse as we said earlier, but Henc is a strong brand that has a big advantage of being distributed throughout the world as Hencie Cognac is rising sharply in the United States, Latin America, Africa. At the end of the day, we look at the region. Shipments are down 4% in the cognac industry whereas Hensy is up 0.5%. So market share gain of HENSI over its peers. So we're very well positioned to grow significantly in the U.
S. As we mentioned last year double digit growth, okay, with younger qualities. So there's a mix effect there, but growth in the U. S. Is tremendous.
It's one of the most sought after brands in the U. S. And we've deployed considerable resources to accelerate growth as we saw in Q3. We're very confident the rebound in the second half in China towards the end of Q2 and all means are deployed to grow on cognac. We've gained market share and in champagnes.
On basic champagne or our prestige cuvees we've grown. We've outperformed our peers. We're gaining market share everywhere 80% of the value in champagne is created by Muay Ten C. In spite of it's a pretty sharp shock given these anti extravagance measures. The Muerten Hense strategy is to be evenly spread across the 4 continents to be poised optimistically and to experience a significant rebound in 2015.
On currency effects, Jean Jacques, well, just remember the figures for the first half, €250,000,000 minus €250,000,000 for the full year. So there's the second half that's more favorable as I showed on sales, but it's also true for profits. If you look by quarter, we should be at minus $40,000,000 Q3 and up 10% in Q4. So with a positive upside in currency in Q4, but it's dampened by 2 key factors. Firstly, all currencies didn't perform well.
The yen slid. The euro no need to recall what happened. Second thing, it's always fundamental to understand the ForEx impact. When currencies rise, there's no currency appreciation. It doesn't mean we have losses.
We had considerable increases. We had good hedges that have won a lot of money. So full year our hedges generated the same profit as last year, but than in 2013, but far more in the first half than in the second half. So there's an imbalance over the year. But all in all, we have a normal trend on the currency impact across the year as to giving you directions to model it.
I mean, it's difficult enough for us. It's not easy. I'm delighted to see that a brilliant analyst doesn't understand any better than I do currency fluctuations. Next question please.
Hello. Good evening. Guernie Foucaultier from JPMorgan. I have a couple of questions. Number 1 on fashion and added goods in Q4.
As an analyst, I'm positively surprised by the plus 4% and Q3 was more of a challenge especially on Louis Vuitton. Can you confirm that Louis Vuitton was enjoyed a 4% increase as well? And was it the new products that drove this trend, the airport trend? And do you expect new launches in 2015 every quarter? I mean, this year they were mostly in October December.
That's question number 1. Number 2, can you tell us about the provisions that were placed above the current EBIT. No, I'll leave it at that if you will. The end of the year was good for Louis Vuitton mostly thanks to the new launches, but also because of the significant growth in the American market. And we certainly intend to continue innovating and launching new products month on month at Louis Vuitton and we're very confident.
I mean at the beginning in the first weeks of the year have started extremely well. Do don't derive from this that we will enjoy huge growth levels. That's not the purpose. I mean the main concept for us is to make our customers happy to increase asset desirability. But if it means that people have to wait a bit longer to get their new leather goods or whatnot, well, they'll have to wait that much longer even if it means less revenue right now.
But I mean because of the size of the market if we launch a new product you distribute it around the world. We don't always have the distribution and production capacity to meet demand and especially as customers are particularly keen to buy new products. But that strategy, we will certainly continue. It's always more fun to look at new products than existing products. Now about provisions.
I expected the question and I tried to get an answer, but we have as many as 60 brands and it's pretty difficult to know. I mean, we have a bit more than 50, a bit less than 100, but we have some reversal of provisions in 2013 not repeated in 2014, some reversals in 2014. It's not complicated, but you have a lengthy list and it's pretty difficult to have but we have about between €50,000,000 and €100,000,000 all in all about in provisions above EBIT. At the back of the room, I'm from Vintiquet for a Italian paper, you talked about the good performance of Loro Piana. Can you give us any indication or some numbers on Loro Piana?
Well, there's one thing about Loro Piana and you probably know, they don't advertise ever. And of course, they save a lot of money there because most businesses do advertise and sometimes quite a lot. But L'Oreal Piedra does not advertise nor does it advertise its performances, its numbers. So all I can tell you is doing well. It's doing even better.
It's growing, but indeed better than we were expecting. Well, the trend is an exciting one, because what I do find remarkable here is we were able to integrate that company within the group while safeguarding its family nature. It's a family owned business and the family is still very much present in the running of affairs. That company actually manufactures the thread, the fabric, all the items that are sold are as it were homemade. And the textiles sold in Italy are exemplary.
I started off in this business, it was quite well 1984 with the Bussac plant and I know a little bit about these things. Believe you me these textile plants are very different here. You have a high level of automation. There was lots of investment to get these high standards. And even though this is based in Italy, believe you me, this is a very profitable business.
We do have our people there. Mathieu Brise in particular is running all this in a most effective and constructive way. I don't know. I mean, that's not really an answer to your question. But I'm afraid that's all I could say.
I do apologize. I mean maybe Antoine can display products or things because that's there you could have a better idea of what LoRa Piana is all about. Some of these well, any case, thank you for being so understanding. Sorry, we couldn't say more. Further questions out there?
Yes,
please. Hi, good evening. It's Louise Singlehurst here from Morgan Stanley. One question for me please. I wonder if you could tell us about your longer term growth expectations generally for the luxury market when we're seeing brands such as Apple and Samsung being referenced as luxury gifting items particularly for the Chinese?
And really your expectations around the longer term growth, is there a new level of competition for luxury? Thank you.
I prefer Tony to answer because he's a specialist of market. I don't know very well market. I don't like market globally. I like specific things, but Tony is very well with market.
I'll address it in English. I believe that the midterm and long term growth vector that supported the growth of luxury market for so many years well ahead of the general economy will continue to be there. It is true, however, that in the short term, there are a number of instabilities. One of them the most important is effectively the anti corruption campaign in China, which have impacted the trade of growth. Probably in 2014 2015, we are seeing the lowest level in terms of organic terms, but we are still talking about the growth around 4% or 5% organically, which many markets will be quite happy about.
So I think that any brand or category that has a good story can still do very, very good performance and that the midterm perspectives are very positive.
Further questions please. Good evening from Hadio Klasik. You've decided to allow your shareholders to benefit from the capital gains on Hermes making them very happy. Can you tell us what the amount was please? So just to respond in order the value of the Hermes stake distributed the €6,900,000,000 the economic cost price €2,700,000,000 that's a CG of €4,210,000,000 had been booked in 2010.
That's €3,200,000,000 of CG €500,000,000 tax. So that's a net CGM of €2.7 billion. We're not going to do the same thing again this year. Louis Moran, Brayan Garnier. Brayan Garnier two questions if I may.
First time what was the development of cognac sales sellout sales in China full year and towards the end? What's the share of your revenue in the Middle East and Russia? Thank you. No sellout was the question. Sellout, well, was negative for reasons outlined earlier.
I can't really say tell you much more. Rest of the world as I said earlier, we have strong increase, but didn't allow us to compensate. But sellout was negative in 2014. Middle East 3%, Russian 2% 2% of sales of course. Yes, we'll take your question.
I see you've had your hand up for a while.
Thank you very much. Mario Taly of Bernstein. Two questions for me.
The first
one is about investment. You have got 65 brands with a lot of entrepreneurs that are asking for money to develop their successful business. What are the 3 businesses in which you will increase the most your investment in 2015? And the second question is about cost control. In the presentation, you mentioned rigorous cost control.
Now I see all the managers of the group that are looking maybe very bad. But have you got any specific initiative in place for cost control? And which result we can deliver in 2015? Thank you.
The first question on capital expenditure, what are the brands where we propose to invest? I think what you have to remember is that if you want to invest in a brand and that's what we've been doing ever since this group has existed. The first thing you need to do is to come up with the right the winning formula and that depends that varies from brand to brand. You can come up with a formula very early on. I mean, Loro China is a case in point.
I mean, this is a formula that works. You can develop. You can create boutiques. You can speed things up. But then another example is Celine.
That's much it took much longer. Even before LVMH was created. We purchased Celine back in the 1980s right at the beginning. And it took us what 15 years to come up with the right formula. And I mean I'm not saying it was losing money or anything, but we felt it just was not worth investing because we didn't have this sort of winning formula this sort of that would make the difference which would make Celine different from the others more desirable than the competition.
And once we did come up with the right formula, well then we came in full steam and invested a lot and generated growth as well. So the brands in which we propose to invest, it's with those brands that have reached this critical point where you are onto a good thing. But it takes a while to get to that stage when you have brand new brands. Flash for instance initially well was something of a challenge. But thanks to the efforts made by Tony and his team, now this is a very successful business especially in Asia.
Indeed, it's one of the first brands for skincare around the world at least and indeed in Asia. So again, we have a very sort of differentiated investment policy and we try to do it right. No point investing in a brand unless you were able to generate this sort of this following, this enthusiasm. And as I said, when we started to go all out with Celine, it was only when we realized when, well, Fibri came along with good management, then we felt, okay, we've got this ready to go to take off and the time has for us to invest. I mean by that time it was already big.
You did have shops and everything, but we sort of pressed ahead when things were really looking ready to take off. Right. And what's item number 2? Whether we have cost control measures underway well yes. I mean we're very stringent on cost control especially on capital expenditure.
I mean, when you have an investment program on a brand these are pretty long term affairs. So you have to see these things through. But before you get started, you discuss this on a strategic level. We discuss it at budget. But you do have to look at the context.
Growth in various markets went from double digit growth to single digit growth which meant that you had to be much more selective. And so brands were asked to be again more rigorous. I mean, all in all, many of our brands had modest growth compared I beg your pardon, you found that costs had only modest growth and that's because we're able to keep things under control. However, for certain brands, it was well worth investing more. For Bvlgari, it was well worth it to invest in display.
So this was not capital expenditure. This was working capital expenditure, but it was well worth it. Sorry.
Could you speak a little louder?
Can you speak into a microphone? Thank you.
Okay. That's good.
Can you please consider
or in the future could you consider to divest from didn't find yet the winning formula to be successful in the market?
Why not? But we don't see right now any brand to divest. What we have in plan is something different. For instance, for a brand like Marc Jacobs, we said that we are aiming to do an IPO with it, because it's a brand in which we are going to be in relatively different niche of the market, more competitive to some other brands like, if you know Michael Kors, which is not exactly it's more a competitor with price points that are lower and coming from the U. S.
And for that brand, we are managing it differently. We are managing it with a U. S. Team that is really motivated by the growth and the potential IPO. Just to give an example, if you take what is the market cap now of Michael Kors, I don't know, but it's above €10,000,000,000 above €10,000,000,000 Okay, if the team succeed in doing that, so maybe at that time, we can do another very good dividend for our shareholders, maybe, but success is never guaranteed.
Thank you. It's John, MainFirst. With regards to top line growth and thinking about the mid- to long term profile. And Tony talked about 5% in the short to mid term. And if you think about your brand manager's performance in terms of taking market share and growing at a double digit rate over the last 20 years, Are you starting to now think of a shift away from a prioritization of top line and focusing more on returns?
Certainly in light of the Hermes distribution and your comments just then with regards to a potential another dividend should Marc Jacobs succeed in his IPO plans. Is this a fundamental shift now that we're starting to see that you'll embed in your managers to focus more on returns rather than top line? Thank you.
I think we have to aim for a good equilibrium. We are looking to grow. But as I said, it's not the main objective. The main objective is really to stay at the top of the desirability. And 2, profitability and return is also an objective.
And we see with this opportunity of Marc Jacobs a way to maybe do it again in a few years maybe. So, it's an equilibrium. And we have other ideas of the same kind, but it's early to discuss.
So maybe the last question. Good evening from Barclays. Three questions on Fashion and Leather Goods. The first on the improvement in organic growth in Q4. Could you give us some color by geographic area, particularly the trend of Vuitton in Asia and sequentially in Hong Kong in particular?
2nd question on price increases of Rivuitton booked in Q4 and your price hikes planned in 2015. And your margin from memory you said that it was flat over the first half. What about the second half? Well, last question. It's easier.
It's stable in H2. No difficulty there for the operating margin as to the split. I'll hand over because it's very technical. Improvement as I said I'll go into details by geography, but an improvement in the U. S.
Improvement that really explains. There's a move to 4% improvement in the U. S. And Europe and a deterioration in Asia stability slightly down in Japan. As to LV in Asia, LV of course was adversely impacted by the situation in Hong Kong.
LV was negative in Hong Kong even across the full year. Well, Q4, Ditto in Macao, so the situation's rather challenging in those two areas. True that I mean ditto for DFS the bulk of the activity in those two areas are suffering quite a lot and they generate a significant bulk of the revenue. A third of Asian revenue for the group or for Vuitton. So that was an unfavorable trend in those two geographies and a trend with Chinese customers that remained acceptable that's positive throughout the year.
And in Q4. Price increases of Vuitton in Q4, there weren't any except in Russia I think, but very few if I'm not mistaken. And for the year for the full year remains shrouded in secrecy. Thank you all very much.