Ladies and gentlemen, good morning. I'd like to welcome you to this Annual General Meeting, and I suggest we appoint as scrutineer on the one hand Mr. Florent Olivier and on the other Mr. Nicolas Bazier. And as meeting secretary Mr.
Bernard Kuhn, who is legal counsel for the group. The quorum of the 5th of shares has been reached. The attendance sheet was drawn up and has been disclosed to the bureau. All the legal documents for this meeting to take valid decisions have been gathered together as well as the response that we will read in due course to the written questions put to the Board. I'd also like to inform you that an officer of the court is present to oversee these proceedings.
This meeting, as is the case for all previous meetings that we've taken part in together, is part of a very broad outreach policy with our shareholders, and we have organized, as in previous years, a survey of shareholders that met with considerable feedback to prepare for this AGM. And later on, we will set out the summary of questions that you put what we can say before. Giving the floor to Mr. Guillaume for the financials is that, as you know, in 2017, we have achieved a record year with a buoyant market, very good results for our group, even if and I'll tell you a bit more about that later, the general outlook, structurally, in terms of the global economy is, in my view, the subject of certain worries midterm regarding the continuation of this situation, which in many respects is rather untypical. So our figures, you're familiar with them.
They've been they're published. They appear on the screen behind you. Revenues have topped for the first time €40,000,000,000 in 2017. Profit from recurring operation above €8,000,000,000 Net income has topped for the first time the €5,000,000,000 mark and free cash flow is up 20%. All this is the result of the extraordinary creativity of our brands.
More about that later over to Mr. Guillenie, who will go into greater detail of the figures.
Thank you. Good morning, everyone. As Mr. Arnaud said, some years are more difficult to introduce than others. I leave you to decide which one this is.
You have the numbers here for 2017. In dark blue, you have the main indicator, which is organic growth. So you have also in light blue the currency effect. All in all, 15% well, you had 12% in S2 in H2, I beg your pardon. You have the scope effect, which is connected to the acquisition of Grimovare and Christian Dior Couture and that was in H2.
And on these numbers, you have a currency effect, which was negative. It was positive in H1, but very negative in H2. And that took 3% out of our sales. But all in all, the sales were up 13% at €42,600,000,000 which is a record for the group. You see that this trend, you can see on the slide, continued in H1 2018.
Organic growth stands at 13%, which is still in line in very much in line with what you had last year. The SCOBE effect is still with us and it will be there till June and that's the consolidation on the full year of Christian Dior Couture. But by contrast, we are you have a negative currency effect, which means that last year the dollar was at 1.06, now it's 1.23. So there is a negative effect, currency effect on H2 last year compared to the year before. Still, we have this remarkable growth.
Sales, the distribution doesn't change much from 1 year to the next. The same comment, you find that Europe accounts for about a third of the sales, Asia, Japan not including Japan, about a third and the North America, 1 quarter and the rest, South America, Pacific is accounts for the rest. Dynamically looking at the regions again, last year, we had a positive development in all regions. You can see that all have enjoyed double digit growth last year, including the U. S, which well, there was a small scope effect, which is not restated here.
We pulled out of Grand Marnier contract, but that had it not been for that period, would have had above 11% growth. Japan was a good surprise. Japan had a challenging year 2016 because there were fewer Chinese tourists who went elsewhere instead. The year was good, not just in terms of tourists, but also local customers, no comment on Asia, 17% within that China is the main contributor with more than 20% growth. In Europe finally, we tend to consider that Europe is always behind, but not really.
You can see that growth there was also 10%. Now then business, I mean, and you look into the numbers here, but especially this 12% organic growth, you can see that growth was also homogeneous depending on all fronts, wines and spirits, a good balance between champagne and cognac. And then you have about 13% and 14% for all other businesses, fashion and leather goods, 13%, perfumes and cosmetics, about 14% and this Selective Living 13%. So we have this overall growth of 12% again. A few words about the income statement.
I won't comment on the first line because you know it, but the gross margin 65.3 percent, this is stable in terms of percentage, but it is up 13% in numbers, in line with the sales themselves. Marketing and selling expenses up 12%. There's a scope effect there about 4% due to the acquisition of Dior Coutu. So not including that, you can see that growth was is sell than is less than organic growth of sales, Admin, there's also a scope effect of 2% or 3%, all in all 8% up, but the profit from recurring operations, as I said, every year is the main indicator of our operations, up 18% at €8,293,000,000 This is a record. We never had reached the €8,000,000,000 mark in the history of the group for the other items on the income statement, other operating expenses and income, €179,000,000 in the red, a bit less than last year, but last year we had an exceptional effect.
The financial profit has changed. I won't get into the details. What you should remember though is that the cost of our currency engines was disproportionately high. The accounting recognition was too high in 2016 and it was the opposite in 2017. And that accounts for most of the difference in the financial income, which is accounts for most of it.
Taxes, about 9.2%. Well, there were a number of items. So we have a better position than last year and not including emergency and DFS where we have minority interest. We still out of that have minority interest group share is 5.1 29,000,000,000 up 29%. It's not the all time record, but the exceptional year, the other year, where we did better than that was when we pulled out of Hermes.
So in normal terms, this is quite a record. Regarding profit from recurring operations, which is our main indicator, you can see that Wines and Spirits were up 4%. Fashion and Leather Goods had a very good year. Operations profit from recurring 27%. There is some scope of activity but even without that it would still be up 20%.
So that is quite remarkable perfumes and cosmetics, washes and jewelry about 10%, which goes to show. And I mean, if you look at the competition in particular, which can't have this sort of growth in profits. And selectively, even in remarkable year, excellent for Zephyra and significant improvement at DFS. DFS suffered because of the situation in Hong Kong and Macau. And now things are looking a bit better, improved in 2017 and we certainly hope it will completely stabilize by in 2018.
A few words about the balance sheet. It is sound, the financial structure. We have about €70,000,000,000 most of it, I mean, you have a significant portion in total equity. Debt is limited. I'll get back to that.
Non current assets increased because of Dior Couture and Removar. Inventories remain under control with growth less than that of sales and then a good cash position. We have more than €3,000,000,000 in confirmed undrawn credit lines, which means that we can face any problem on the financial markets if that should occur. A few words about the net financial debt and the free cash flow, you can see in Daegu that the debt went up significantly last year from 3.2 3,300,000,000 to 7,200,000,000 up 3,900,000,000 euros So what came into that? Well, let me explain.
We had a few acquisitions about €6,700,000,000 the acquisitions of Dior Homovard and minority interest in L'Europe Pienaar, some operations, but these are the main operations Dior. In Rimowa, there was a dividend payout in cash of €2,100,000,000 last year. And the cash flow, as you can see in gray, next to the debt, net cash flow at €4,700,000,000 is another record. If you look at that period since September, you can see that it's another record in the history of the group because we generated a significant surplus from our operations. Cash flow is what remains once we have paid the investment and suffered an increase in working capital requirements mostly from inventory.
So a good cash flow performance so that the debt was kept under control. I mean, euros 7,200,000,000 is still pretty reasonable, only 40% of current assets. If you look at EBITDA, that is operating income prior to depreciation, that is €10,000,000,000 so 0.7 is considered by rating agencies as a reasonable number, debt to EBITDA. Now if we look at the dividend that is also should be noted, euros 5 up 25%, which is in line with the growth in net income and cash flow. So up 25% compared to last year.
There was an interim dividend paid in December. So the balance will be paid out on the 19th April. This is what I had to say. Thank you for your attention.
So now let's turn to the results of the questions that you put in the survey that will be presented in
the
So let me begin by reviewing business for 2017 because today's general meeting is focusing on 2017 before turning to the strategy after the second clip that will be shown to you after 2017. It's always a rather difficult exercise at the risk of being rather repetitive. Last year was already a record year. Here's another. What I can say is that at LVMH, we're all very pleased to be able to, over and above these results that are good, to illustrate the excellence of France in the world.
And I'd like to begin by congratulating all the employees who are here present and who contributed to this effort that supersedes us all and is one of the key successes of LVMH. We represent the qualities of the country. We represent the artisanal know how of France in the world. And for this, and I'd like to stress this at the outset that we're one of the groups even if today for stock market reasons, more about that in a moment, we're the leading French company in terms of market capitalization. We're one of the groups that perhaps hires the most people in France.
So we represent France and we provide work to French artisans, craftsmen and women and we ensure the sustainability of this French craftsmanship that is one of the sources of the success and renowned of the country throughout the world. So how, more practically, did this unfold during the course of 2017 according to our various areas of activities? Because we're fortunate at LVMH to be diversified, to be the only luxury group in the world that is present across all luxury sectors, which, as you know, provides us great strength and allows us to weather both short term crises as well as geopolitical crises with greater flexibility than if we were limited to a specific area of activity. Wines and Spirits, to begin with, excellent performance delivered in 2017. Volumes are up 8% in cognac and that we shipped approximately 7,500,000 cases that places us far and away in the lead of the cognac market.
I think we're 4x bigger than the number 2 player in this business. And in order to face and meet very strong demand for our products, for our high quality products, notably in the United States. We have invested and inaugurated at the end of last year a new bottling site next to cognac, Ponnave, where we've opened a bottling line of 2,000,000 cases to be followed shortly by a second tranche of 2,000,000 cases. The problem in cognac being supply more than the manufacture. It's the supply of fine wines that is critical to meet demand that for the time being is growing and that we seek to supply with the best qualities possible in champagne to good increase, up 4% in volume terms.
And I'd like to mention in passing the special Cuvee Dom Perignon. As you know, Dom Perignon is the finest champagne in the world recognized worldwide, one of the most iconic names, the inventor of champagne since Louis 14. And we this year launched the P2 vintage. I invite our shareholders to taste it. P2 1998.
That's quite outstanding. Difficult to find, let me tell you. Not easy to find. Even I have difficulty in finding a bottle. So it was actually an outstanding success.
No, it's true. It was difficult. The other evening, we were celebrating a birthday at my home, and I couldn't get my hands on the bottle. I had to make do with Muet. So in this activity, we're, of course, developing our in house productions, but we're also seeking to acquire brands.
And this year, we acquired a small U. S. Whiskey, Woodinville and a Californian wine, extraordinary famous Colgan. Our American friends know it well. Here, the bottles are difficult to find.
You need to sign up to register to be fortunate to buy a bottle. And it's an incredible location because by surprising happenstance. There's a lake that is nearby that is the Hensy Lake in Napa Valley. That's quite a coincidence. And if you visit California, I invite you to visit this location that's quite amazing.
We also launched a tequila with a Mexican partner, Telkilavolcan that's off to a great start. So that's for Wines and Spirits in 20 17. Next, one of the prime activities, fashion and leather goods with, of course, our flagship brand, Louis Vuitton, that is displaying outstanding creativity. Thanks to outstanding designers, 1st and foremost, Nicolas Chisquier, who always delivers collections of outstanding. Renal, a cruise show in Japan that met with considerable success, a lot of sales in the wake of that and also thanks to the combined efforts of Michael and Delphine designs with artists.
So this year, we collaborated with Jeff Koons, the master collection in which you may have seen some models depicting the Mona Lisa that's also sold out And we were very pleased to inaugurate the launch in the hall where the Mona Lisa is displayed in the Louvre, had a dinner. Jeff Koons gave a speech, so that was wonderful. Products met with huge acclaim, also great success this year with a cooperation with the Supreme brand. Michael will no doubt recall that it was sold out in a week. All this was keenly awaited.
And let me add that we just launched the same thing this year with Supreme and the Remova luggage, which also was sold out in a day with people queuing for several days waiting outside the Rimowa store on Rodeo Drive to buy the luggage. There aren't many pieces of luggage. If you want to find some, there are some available on 24 Sevres, which is our site, but there are only 10. So you need to sign up beforehand, but they're very good, they're great, they're red. But Vuitton this year also organized 2 major exhibitions, 1 in Korea, very successful, and one in New York that met with huge acclaim.
And I need to mention, of course, the inauguration and the opening of the Maison Vuitton Place Vendome in Paris that's quite outstanding. Some of you have already had occasion to visit it. It's really a must see for all foreign visitors to Paris, Place Vendome, one of the finest squares in Paris. This mansion house designed by Massard is wonderful, has been totally renovated, refurbished from top to bottom and it shows the excellence of Vuitton products in to the full. Perfumes and Cosmetics now also delivered a quite outstanding year, in particular Dior that continued to increase its market share.
We need to say this in passing, outpacing its peers and incredible success with Sauvage, its men's fragrance. We've just launched an haute parfum version that is a big hit throughout the world and the more traditional lines of iconic such as Jadore and Missio have met with considerable success as well as makeup, etcetera. I won't go into the long list of products. There'd be too much to say. Guerlain held up well.
Likewise, Benefit, Just a word about a highlight in perfumes and cosmetics. Last year, launched by Kendo, the incubator for Sephora. That's collaboration with a lead singer, Rihanna. And we launched a collection of cosmetics from her ideas. And based on Sephora know how, it was a great success.
Well, we can't give you the exact figures, but from September full year, we generated several €100,000,000 revenue. And this year, we'll probably reach €500,000,000 Just by comparison, I see certain peers who are buying brands and pay 1,000,000,000 for them, sometimes more. We launched it from scratch. We moved slowly but surely, and we're going to generate very considerable revenue that shows the creativity and that's what counts, creativity with us more than the ability to invest because we could also buy brands. In fact, brands are offered to us.
We're always offered everything, but sometimes we can resist temptations well and we have other ways of getting there. So we did buy a brand, a brand of perfumes, a cure jar. We paid a certain price for that, but it's a small brand with a well very talented designer. I think that's going to be a success. Turning now to Watches and Jewelry.
Also very good year. On Watches and Jewelry we had great success with Bvlgari. Bulgari has delivered an excellent performance. Bulgari that is successful with its iconic lines that opened its new store on Fifth Avenue with Peter Marino in New York. That's very successful.
That location is yielding great results and at the same time truly shows the full extent of the brand in the United States. Also in watches, a new connected watch, TAG Heuer, that works very well. And let's also mention in passing, Shomei that organized a very fine exhibition in Beijing, The Forbidden City. That was a great show and that's going to repeat that this year in Japan and show me one of the oldest of French jewelers on the Place Vendome for years and is expanding very successfully. Let me end the presentation of 2017 with Selective Retailing.
I hope I haven't forgotten anything. Selective retailing, 2 areas. DFS, to begin with, that held up well. At the end of last year, we were able to exit a bad contract in Hong Kong Airport, and tourist flows are picking up again. That will be in Southeast Asia, Hong Kong.
That good for business for 2018. That augurs well. As to Sephora, the performance remains stellar as always gaining market share across the board. We can say that Sephora is the leading global retailer of beauty products. We acquired it in 1998.
It was a very small operation. Now it's the world's number 1. The world's number 1 in terms of sales of selective retailing of beauty products on the net. We're expanding in the United States. We've opened in Germany last year.
That's a first. We achieved considerable success in Australia. Luxilae is our operation over there that's developing well. The company is in great shape. Let me end with the Louis Vuitton Foundation in 2017 because I believe a number of our shareholders indeed, most shareholders are, of course, most welcome and receive tickets that allow them not to have to queue too long to visit these exhibitions.
I'd just like to recall the huge success of our exhibitions 2017, the Russian Exhibitions, Chukin Collection that beat all records of exhibitions in France, whatever museum, an all time record. And I can announce that we in 20 7 2020, we plan to receive another Russian collection from the same period, the early 20th century that will be presented for the first time together in France at the Louis Vuitton Foundation. And I'm sure on that occasion, we'll beat the record set at the previous exhibition. That's a summary of 2017. I hope I haven't forgotten anything because my notes are a bit mixed up.
But I now suggest we move to the second clip. Well, before moving to strategy, indeed, I'd omitted a couple of points, some important ones, notably early 2017, the arrival of Christian Dior, Rodeo VMH. You see that quite a bit of emotion in the front row there. Something must have happened indeed. That was an omission on my part.
It's always the most important thing that one tends to forget. So this arrival is absolutely wonderful because it gives an even greater dimension to our fashion and leather goods business and allows us to bring even closer Couture to perfumes. And we got Mr. Bekari to return to Paris where he'll be improving his French. It's already pretty good to head up this operation.
Mr. Sidney Toledano, who headed Dior with mastery for years. I won't give you the number of years, Sydney, because it won't make us feel any younger, but he will now head up all the fashion activities of the fashion group with a whole series of brands quite iconic that are very successful. And the first piece of news that we focused on is the arrival of a new designer at Celine, Mr. Hedi Slimanen.
I have absolutely no doubt that in the coming years you'll see the figures of this operation because you're interested in the products but also the figures of shareholders. You'll see those numbers leap with the outstanding creativity of this talented indeed amongst the most talented designers. And we indeed set great store by him and have high hopes around €1,000,000,000 We expect it to reach €2,000,000,000 possibly €3,000,000,000 We'll see it depends on the combined talent of its leaders and the designers. So the targets have been set. And now we'll look to the results.
I also wish to say a word about Lohr, Pianna and Balutis that delivered an excellent year in 2017 with a sharp return to growth and the finest products. Let's not forget what we achieved with Le Bon Marche. Le Bon Marche is a flagship store in Paris that is going from success to greater success. We've opened a second Episcry on the right bank that is off to a good start. We also launched the Internet platform 24seve that I mentioned earlier for the Bon Marche store.
Moving now to strategy. Well, on the strategic front, at the risk of being rather repetitive because what's specific to a good strategy is that once it's defined, we try and stick to it. And that's what we do without changing it as events unfold. As I said, cautiously confident is the headline. We have to look at the global situation with a little perspective.
We are in a very surprising situation Since I've been the head of this company, I've never seen interest rates at such an all time low with easy money flowing everywhere. I mean, we're offered the bankers who are always full of ideas, very dynamic, offer us money, paying us to lend us money is quite extraordinary. I mean if these offers are made to others, we manage to resist. But I'm sure that it leads to temptations or even potential catastrophes. So this interest rate situation, very easy money, the fact that asset prices reaching dizzying heights, all time high, be it in businesses or assets that are not necessarily equities, I mean the price of certain paintings, at some point, all that becomes rather meaningless.
The fact that for over 10 years now, there hasn't been a major economic crisis leads me to believe, as I said last year, and in fact, I said we can't predict when a crisis will occur. But it's my firm belief that in the next 5 years, there will necessarily be another major economic crisis that will be the consequence of the totally abnormal situation in which we find ourselves the day interest rates rise. I mean things can happen. I mean I'm not a macroeconomic specialist nor am I able to predict future events, but I believe we need to be cautious, prudent, and we need to take advantage of the situation today. Drink Dom Perignon, but it won't last forever.
So let's be prudent. That's what we're doing. We're fortunate in having very little debt in terms of our financial solidity. The day markets dropped sharply, we're quite well positioned to benefit that as we did in 2 1,007. I don't want to be defeatist, but I think we need to keep that in mind when talking about the strategy.
Now the strategy. Well, the group's I mean, having said that, I'm not a pessimist for the midterm. I remain very confident regarding the drivers that have led to the success of this company for the past 20 years. And the prime engine aside from the intrinsic quality of our products that I'll discuss is the continuous increase in living standards throughout the world. Notably, in countries where back then there were hardly any customers such as China that has become one of the major markets.
And this trend will continue. They'll necessarily be more challenging times, but they will be periods that are relatively short lived as was the case for the last major crisis. Now our strategy, at the risk of repeating myself, is based on values, 1st and foremost amongst which is creativity, creativity, innovation. And that's one of the fundamentals of LVMH, one of the pillars underpinning our success and is to be found across all our activities, notably in Wines and Spirits with ongoing innovations in perfumes. There again, technological innovation with the latest creams launched by Dior.
Innovations in watch making the Bvlgari watches that are now the finest, the slimmest in the world, the Tourbillon Bulgari watch, the slimmest in existence, only a few millimeters. And of course, Rivieton that shines through its continuous innovation, its new products, its creativity, its fashion shows, etcetera, and also shines through its selectivity. And that's what needs to be underscored in terms of strategy. We are selective. At Dritton, we could move a lot faster.
Michael often says to me and so does Delphine that it would be quite feasible, but it would be to the detriment of quality and it would be opening up retailing which would lead to serious consequences regarding the brand's perception, its status, its image and desirability, Vuitton remains a company whose fundamental goal even if figures are very good is not revenue. The fundamental goal is the desirability of the brand. And what I'm interested in at Vuitton is not its size is that Vuitton in 10 years' time should be the most desirable brand in the world even if there are some smaller brands that are growing very fast, etcetera. What I wish is that Vuitton should remain the most desirable from that. We won't depart from our strategy.
Our strategy that, for example, is to never organize sales, never to organize outlets selling at knockdown prices, not to expand or develop willy nilly as we can see in certain cases on the net that Vuitton products can be sold on the net anywhere in the world of prices that are not controlled. And all this down the road would be very detrimental to our brand and we have a very strict policy on that front. But controlled retailing, ditto for Dior. There again, we have a very controlled retailing policy at Vuitton. Nothing is sold.
No Vuitton product is sold outside stores that are owned or controlled by Vuitton. Nothing is sold if it's not on the Vuitton. And this is an incredible strength and it's absolutely fundamental, and that is shared by the Vuitton teams. And the revenue as a consequence, don't be surprised. I mean the sales figure is good because products are very desirable even if we have sometimes difficulty the is to elicit desirability for the long term.
That's why we just launched a leather goods collection called Summer. Absolutely great. It's almost sold out and that's well and good. It shows that it's hugely desirable. It's going to prompt our teams to create another.
We're not going to produce more to generate more sales. We could double. We just had to produce more. We could double the revenue. I don't believe that's the strategy.
So we want to give our customers an experience and the Vam Dorm store for that provides an outstanding customer experience. So that's for creativity, which, as I said, is one of the pillars, one of our core values. And to illustrate this actually, I'm asked to mention many things, but I can't mention everything in the interest of time. But in the clip, yes, we spoke about digital strategy. We're very much focused on our digital strategy.
We launched 24 CEVRE. We also, with VIVA Technology, took part in the 1st LVMH Innovation Award, which is a competition that we're repeating this year. We already have 800 applications to participate. And we inaugurated 3 days ago the start up house station F, where we have a program sponsoring, supporting some 50 startups per year linked to obviously, they won't all become large companies, but I'm sure we will find a few that are genuine nuggets for the future. I mentioned also Sephora.
On the net, it's with us at Vuitton that provides service to the customers for the sale of products. Sephora is the leader of sales via the net. And sales are making great strides. I won't give the figure because it could set rather a high indication, but the numbers remain very high. 2nd value in terms of the strategy.
No change over last year is quality. We constantly focus on quality with the search for the best manufacturing processes. And for this, we're opening workshops manufacturing facilities in France. We just opened one recently with Louis Vuitton. And this allows us, as I said earlier, we're very proud of this to hire craftsmen and women in France for our businesses.
It takes time. When we open a Vuitton workshop, it takes time. But after 12 or 18 months, we have great teams that produce products that are the envy of the world. Bilgari has also opened a new facility for watchmaking in Italy, and we have every confidence in the growth and quality of these products. Earlier, I mentioned this ultra slim watch, which is outstanding from the technological standpoint.
All this would not be possible without teams that are motivated and imbued with an entrepreneurial mindset. That's our 3rd value, the entrepreneurial mindset, the spirit of enterprise that really makes And thanks to the group's success, thanks to the number of brands that are outstanding in the group and thanks to this entrepreneurial spirit, we can attract the best and the brightest to work for us be they designers, researchers or future managers because they know that this group offers the best prospects with a very agile working environment. When we met at the Station F, we saw all the youngsters who were there all coming to ask questions. They want to contribute and take part in the success of the group that is a great French success and radiates throughout the world. And that motivates them hugely because our brand amongst the French names that are the most widely known worldwide and which attract, be it young French people, young Chinese, young Americans, young Brazilians, etcetera.
The group today is over 140,000 people. When I began, we were fewer than 20,000 back in the '90s. So that's quite a remarkable achievement. And the bulk of our production is located France that's very significant. We hire not just managers but also many artisans, and we train them.
We have great many apprentices. We have several 1,000 apprentices in the group and they're all in training sometimes with work experience. And in 90%, 95%, we hire them after the apprenticeship to for our workshop. So these values rest on the transmission of our know how and values in the group with an initiative that we which is being LVMH. That's English because we also have many of our people who speak English with workshops that are spread throughout the world and we also have exacting integrity standards and we've adopted a code of practice that sets a very clear line regarding the way we conduct our business in terms of governance and interaction with various parties in the company.
We recently adopted a charter on working relationships and well-being of our models. There are many questions on that. We attract the best for the 12 consecutive year. We're number 1 in the, universe and index, recognized without question. And I'm informed that once again we'll be number 1 this year.
So we are the most attractive employer in France for young people, students, notably from business schools. We're also seeking to build the loyalty of our employees. 3 out of 4 key positions are filled through in house promotion and we seek to develop female talents because our businesses attract great many women. In fact, 70% of the group's employees in total are women. We obviously want to sustain no harm.
I think I'll just accelerate a little here. Otherwise, we won't have time to answer all your questions. The training program for excellence for youngsters and apprenticeships, sometimes selected from underprivileged neighbors. We bring them from certain areas of Paris and offer them a complete change. We're very proud of that.
And lastly, I'll just say a word last but not least, our environmental policy. For 25 years now, we've had this policy and this environment department and the
it
eco designs our products, traceability of materials, reduced energy and water consumption in our stores and reduced CO2 emissions. We've increased our carbon fund, reduced energy in our stores, boosted the share of renewables. And we can say that our environmental performance was obtained like for like by reducing our energy consumption, that's important, and our harmful gas emissions. The excellence of the group's products is based on outstanding natural materials, and we develop the best standards in order to protect the supply of these strategic materials. All our vineyards that we own are certified sustainable wine growing.
A number of our leathers come from Leather Working Group certified provenance, and we have we attach particular attention to this. We have a department that was set up 20 years ago for or even more on environmental policy, which is constantly informed and involved in all the new activities of the group. That's what I wish to say to you regarding the strategy. I hope that I haven't forgotten anything, but we will, of course, be available to take your questions. Thank you.
Before we give the floor to the auditors who've already come up on stage, we will show a short film about an event and that is the next edition of the Journee Particulier. So you'll have a sneak preview of that. Thank you to the fine work you're doing with Laurent Pilar, Bernard Louthy and Jean Paulie, particularly. Thank you for Antoine Arnaud. And now our auditor has the floor.
Thank you, sir. Good morning, ladies and gentlemen, shareholders. On behalf of the College of Auditors, it is my pleasure to introduce the 5 reports published for your attention. You have them in the 2017 registration document that you were handed out when you came in. So a brief summary.
We have a report on the annual reports and one on the consolidated accounts. You have a report on the regulated party agreements and commitments and then 2 reports on operations regarding the company's capital. Regarding the annual and consolidated reports, we do set aside without reservation the accounts that were presented and that are put to your approval in resolutions 12 of this AGM. We also point out that as part of the implementation of the European Audit Reform that the format of our reports has changed. And in particular, we indicate the key items, which according to our own professional opinion, were the most significant in the production of the accounts.
So regarding the annual accounts, it is the assessment of the redeemable shares and the provisions. So we had Christian Dior Couture, assessment of fixed assets, assessment of inventories and items under operation and then provisions for risks and unexpected expenses. We, of course, have ensured that everything is done according to regulation. But now in the report on related party agreements, there are 2 additional agreements, which the Board of Directors of this company has previously approved. Number 1, on the compensation to 2 to 3 directors for specific work conducted as part of the acquisition of Christian Dior Couture.
The second one is on that self same acquisition. The related party agreements and commitments that were approved in previous years and which were continued in 2017 are also presented in this self same report. And then finally, as part of the extraordinary part of this shareholders meeting, we produced 2 special reports on resolutions related to capital transactions. 1 is on the reduction of the capital and then another one on the issue of free shares. There are no comments on these operations because they are in line with the provisions of the Code of Commerce.
Ladies and gentlemen, Mr. President, thank you for your attention. Before we move on to the questions, just a few words. Somebody is missing, and that's my friend, Pierre Godet, who left us at the beginning of the year. And alongside us for many years and many of you may remember, he was there at our AGMs.
We miss him a lot. He was an exceptional person, exceptional personality who did a lot for the group, and I wanted to pay tribute to him. Before we move on to the questions, we did receive questions in writing put to us by shareholders. And so as provided by legal provisions, I'll give the floor to Mr. Kyun, who will provide the answers of the Board of Directors to each of the questions.
Thank you. 3 shareholders in the company sent questions in writing for which we have the following answers. The first question was asked by FII Trust on the role of LVMH as part of the Paris Agreement after COP21. So the commitments made by LVMH to reduce greenhouse gas emissions. And there was a question on the fact that the group didn't sign up to science based targets, which propose to monitor these emissions scientifically.
Now the Board of Directors' response is as follows. LVMH in 2017 celebrated the 20 5th anniversary of its first program on the environment, one of whose five main objectives is precisely to reduce greenhouse gas emissions. In this respect, LVMH since the end of 1990s has been monitoring its energy consumption. And in 2015, it was one of the first big companies to start its own carbon fund with its own internal carbon price. Moreover, LVMH committed to cut its greenhouse gas emissions by 25% by 2020 with a view to following the recommendations of the IGCC and the factor 4 commitment by France to divide these emissions by a factor of 4 by 2,050.
And then again by 2020, there would be at least 30% of renewable energies in its energy mix. Regarding the science based targets initiative, LVMH has been monitoring the work conducted. But apart from the fact that there is no standards or industry based standards, But the development of such standards by the industries themselves might raise issues of independence and credibility. And that is why LVMH does not propose to join this initiative. However, LVMH is very much in favor of monitoring corporate commitment or implementation of the commitments of the COP21 with the organizations that are in charge of following up on these commitments?
The second question was asked by Peter on the use of the skin of exotic animals in leather goods. LVMH is very much committed to the provisions of the Washington Convention of 19 73 on the trade of certain in certain animals and has scrupulously abided by the provisions of that convention. LVMH ensures that all providers of use should be abiding by regulations with certificates of origin for all imports and exports. Regarding crocodiles, the Henlong tannery in Singapore has stopped all purchase of animal use in Vietnam where reprehensible practices were found. As early as by the end of 2018, all the supply farms providing animal skins will be audited and certified by independent bodies.
Similar provisions are applied to ostrich skin. LVMH denounces the PETA's attitude which in spite of its of a number of warnings has continued to incriminate LVMH in a deliberate attempt to associate this group with practices that it itself condemns? The third question is on the objectives that have been set and the questions on the compensation packages of executive officers. There's another question on the membership of the Board of Directors and the fact that no customers are represented on the Board of Directors. The answer of the Board of Directors is as follows.
On the first aspect, as indicated in registration document and has been for many years, the variable part of the CEO and indeed of the associate CEO, this compensation package and the bonus is based on quantifiable objectives and qualitative objectives. The latter weigh for 50% for the CEO and onethree 33 percent for the associate CEO. The qualitative aspects in the environment has pride of place. Now this distribution between quantitative and qualitative criteria seem appropriate in view of the weight of the bonus as compared with the fixed part of the compensation package. On the second issue, this was the sales team shareholder raised the same question in the previous AGM.
It is noted that products marketed by LVMH are usually distributed directly to end users through its network of shops and boutiques And there are more than 4,300 of them. There were more than 4,300 of them at 31 December 2017. This enables the group to be in direct contact with customers and to know what customers wish and to respond to these wishes. Moreover, it has been found that the well, the nature of our products is such that each member of the board is also a customer of the group so that directors one way or the other also express the perceptions of the LVMH customers. And so it doesn't appear necessary to create specific representation for customers of LVMH on the board.
Well, thank you. And I will ask members of the COMEX to join me up on stage to take your questions. Ladies and gentlemen, the COMEX is there to take Good morning. My name is Jacques Bibas. I'm an individual shareholder.
I would like to know about the Samaritan project. Where do we stand? Will there be any effect on the group's employees? Are we encountering the same sort of trouble that we had when the project started? Well, it is a challenging project.
La Saint Martin has remained closed for 10 years, thanks to various attacks that we suffered, criticism, conflicting core decisions regarding the building, the construction of the building. Now construction is underway. The position of employees is unfortunate. The opening has been delayed and that means that we will not be able to hire people. I mean that is delaying the moment where we can hire help and we're looking at several 1,000 people working in the new revamped Saint Martin.
This is of course totally independent of our will. And there you have one piece of property, the heart of Paris, one of the finest locations in town. And that has remained closed for upwards of 10 years now. Things are underway now. You can see the construction site.
We expect work to be completed by the end of next year or maybe the beginning of 2020. Further questions? Yes. My name is de Solange, and I represent an association of individual shareholder. Mr.
Seo, a couple of questions a few questions and comments. A comment, I hope you had an enjoyable dinner at the Louvre in the company of the Mona Lisa. Another comment, thank you for organizing next for 2020 a new exhibition of Russian artists. We look forward to seeing this and we certainly hope we shareholders will get tickets given to us. A question about the LVMH Innovation Award and it was early tech data.
I believe this was something to do with deep learning technology. How on earth does deep learning find its place in the business of LVMH? The second question is in beauty and cosmetics, I believe you purchased a number of small companies that were able to grow, but did you target specifically Modiface? I believe that company is involved in augmented reality for various purposes. And if not, why not?
And then a third question, if I may, we know that you're concerned about your CSR policies. What's your policies visavis stakeholders? Are you proposing to create a committee of stakeholders that would report annually to the board? Thank you. First question, Yuritak is a start up and we saw them again last week at Station F.
And that company's business is to work on deep learning in the sales in our stores. And indeed, that is already in place in a number of stores. This enables us to know our customers better. We have an analysis of our customership. There's a website that is dedicated to that.
Mode Deface is a company which we did consider. It's a fine company. We do work with them, but we decided not to acquire them because such company as this, once it is taken over by a large company, it loses some of its vitality. And the reason, I mean, we did have the right of first refusal, but we felt that if we bought that company and it was merged within the group, it would lose its energy because it would lift with only one customer, the internal customer. There's I mean, we can find similar companies to do the same thing, but such a company as this, its own vitality derives from the presence of many customers.
Once it's closed, when it's part of a bigger group, I mean, we may be wrong, but we were concerned that it might lose its creative capacity and that it might demotivate these the people and that would of course run counter to this events. The last question, our stakeholders will be close to them. I don't think we need to add one additional layer with committees. We have I mean, if you want to raise questions straight to us, you can do this, but creating another committee, I don't believe in that. Are there further questions?
Hello. My name is Sylvie Lang Roy. I'm a small shareholder. I have a question and a comment. Earlier, the auditor told us that we could find all the numbers in the registration document.
I had a hard time finding such a report. Well, apparently there were not enough to go around. That's the comment. And I'm sure it will be sent by the club, but that will be too late. I would have liked to have it before the meeting.
But then a question, might it not be possible through the Shareholders Club to organize visits of the Saint Martin construction site? Thank you. Regarding Saint Martin, we certainly intend to include Saint Martin in the Journee Particulier and the shareholders club has special access. So that might that was quite possible. Regarding the annual report, well, there were copies.
Well, we thought we had enough, but it has been online for 3 weeks now as provided by law. Hello. My name is Hambridi from Fashion Network. I have 3 questions. 24 Sevres, is this part of Fashion and Leather Goods or Selective Retailing?
And there are not that many products sold there. What's the sales of that are 24.7? A second point, Mr. Grioni referred to said that the touch base the touchstone of your organization is recurring operating profits profits from recurring operations. But 25 years ago when I came to the AGM, the significance of profits from recurring operations in Vuitton I mean the size rather of Vuitton compared to the rest of the group, the percentage remain the same.
So you said that your group can be present in several industries, 7 sectors, but the priority remains to do remains with Vuitton. Are you not concerned about the future because finally this is in a way your flagship brand and it has it keeps the pride of place in your accounts. 3rd point, one of your decision makers met the Wertheimer brothers to discuss the possibility of an acquisition of the Chanel brand. Where do we stand with that? Well, 24 Sevres is a selective retailing, but the sales figure is confidential, I'm sorry.
The second question, I've known you for a number of years, and it seems to me maybe 20 years. Now you have you've grayed a bit, but I believe that you asked yourself same question 20 years ago. So I'm no more concerned now than I was 20 years ago. I remember when I took over LVMH in the early 1990s, we're told, so there's one problem with LVMH and that is Vuitton. And I said, really?
Vuitton is too big. It takes too much place. It sells too many products. This cannot go on. Well, look where we stand 20 years on the road.
Chanel is a superb business, but we have no contacts there. I don't know where you got your news from. I'm afraid this is fake news. It's pretty fashionable nowadays. Further question?
Mr. President, good morning. Bernard Ali, I'm an individual shareholder. I may sound a bit greedy, but when the dividend stands, it's €5, which is quite huge in absolute numbers. But in relative numbers, it's not so big.
Yesterday, you had the return is about 1.79%. That's not so good as all that. And then another point, do you propose to have to divide the value of share?
Do you
consider a share split? And then for shareholders, could you are you considering the giving out of free shares or some source of share subsidy? Well, on profitability, 1.7 percent is not so bad. When I put my money in the bank, the bank asked me to pay them. So I'd rather have LVMH shares and earn and get my 1.7%.
And if you think that's not good enough, you may wish to sell your shares and buy something that brings in more. We'll see where we stand 5 years from now. Shares splitting, I'm not in favor When our shares are worth the size of that of Mr. Buffet's name, we might reconsider, but not really. Good morning, sir.
Christian Desprie, I'm an individual shareholder. Is it not the case that your real competitors are not so much in luxury industry, but the GAFAM? And what's your view on GAFAM's M standing for Microsoft? Out of order, isn't it? I mean, we sell products, not data.
So our business is very different. The only comparison, but I do make the comparison because we often said what the share price is high, the market value is high. And I tell my people, some of whom are here, that it is true compared to GAAPA or indeed GAAPM, as you pointed out, we are tiny, we are minute. I mean, we may wish to be ambitious. We still have some ways to go.
If we want to bridge the gap with Facebook or Amazon, we have some ways to go. By way of market value, we have some ways to go. So that is the comparison I can accept. But we do not we do not sell data. We sell products.
My name is Madame Butard. I'm an individual shareholder. Good morning, sir. It seems that Mrs. Brigitte Macron dresses in Vuitton.
Has that made any difference to the sales of Vuitton? Well, Louis Vuitton and Nicolas Garcia are delighted to address the First Lady. This has no commercial effect, but we're the number one house of Couture. We are the number one brand in the world and we by the way, she only she doesn't wear only Vuitton, but we're delighted to provide clothes to the ladies to the First Lady who wears them beautifully by the way. Well, if there are no further questions, one last question.
Mr. President, sorry to insist, I'm a bit stubborn, but I asked about rewarding long term shareholders, free shares or a subsidized shares. I believe that you're a bit greedy because come on, you should be happy with the share price. You could highlight the fact that the share price has gone up. That's pretty good.
Right. Well, look, the time has come for us to vote on the resolutions.
So first resolution approval of the parent company financial statements 2017, please vote. So we're going to vote again. I believe we suffered a slight technical hitch. Approved. 2nd resolution, approval of the consolidated financial statements.
Please vote. Approve. Approved. 4th resolution related party agreements. Please
vote.
Approved. 5th resolution, renewal of Mr. Antoine Harno's term of office. Please vote. Approved.
Well done, Antoine. Renewal of Mr. Basio's term of office as director.
Approve.
Approve. Well done, Nicolas. Renewal of the term of Director of Mr. Charles de Croixier, please vote. Approve.
Well done, Charles. Renewal of Lord Powell as Director, please vote. Well done, Charles. Resolution number 9, renewal of Mr. Yves Thilbod Silghive, term as Director.
Please vote. Approve. Well done, Ithibot. 10th resolution, approval of the items of my compensation. Please vote.
Approved items of compensation of Mr. Baloney. Please vote. Approved compensation policy for company officers. Please vote.
To be granted to the board to trade in the company's shares. Please vote. Approved Resolution 15, authorization to the Board to award bonus shares. Please vote. Approved 16th and final resolution amendments to the bylaws.
Please vote. Approved.