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. Florian Ollivier and on the other Mr. Nicolas Bazire, and as meeting secretary Mr. Bernard Kuhn, who's legal counsel for the group. The quorum of the fifth 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. Later on, we will set out the summary of questions that you put. What we can say before giving the floor to Mr. Guiony 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. 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 EUR 40 billion in 2017. Profit from recurring operation above EUR 8 billion. Net income has topped for the first time the EUR 5 billion 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. Guiony, who will go into greater detail of the figures.
Merci. Thank you. Good morning, everyone. As Mr. Arnault 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. You have also in light blue the currency effect. All in all, 15%. Well, you had 12% in H2, I beg your pardon. You have the scope effect, which is connected to the acquisition of Rimowa and Christian Dior Couture, and that was in H2. On these numbers, you have a currency effect, which was negative. It was positive in H1, but very negative in H2. That took 3% out of our sales.
All in all, the sales were up 13% at EUR 42.6 billion, which is a record for the group. You see that this trend, you can see on the trend, on the slide, continued in H1 2018. Organic growth stands at 13%, which is still very much in line with what you had last year. The scope effect is still with us, and it will be there till June, and that is the consolidation on the full year of Christian Dior Haute Couture. By contrast, you have a negative currency effect, which means that last year the dollar was at 1.06. Now it is 1.23.
There is a negative effect, currency effect in H2 last year compared to the year before. Still, we have this remarkable growth. Sales. The distribution doesn't change much from one year to the next. The same comment, you find that Europe accounts for about 1/3 of the sales. Asia, Japan, not including Japan, about 1/3 . North America, one quarter. The rest, South America, Pacific 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, Grand Marnier contract.
Had it not been for that, we would've had about 11% growth. Japan was a good surprise. Japan had a challenging year in 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, we tend to consider that Europe is always behind, but not really. You can see that growth there was also 10%. Business, I mean, 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.
You have about 13% and 14% for all other businesses, fashion leather goods, 13%, perfumes and cosmetics, about 14%, and the selective retailing 13%. 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, the gross margin 65.3%, 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 Couture. Not including that, you can see the growth was less than organic growth of sales.
Admin, there's also a scope effect of 2% or 3%, all in all, 8% up. The profit from recurring operations, as I said every year, is the main indicator of our operations, up 18% at EUR 8.293 billion. This is a record. We never had reached the EUR 8 billion mark in the history of the group. For the other items on the income statement, other operating expenses and income, EUR 179 million 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 hedges was disproportionately high. The accounting recognition was too high in 2016, and it was the opposite in 2017.
That accounts for most of the difference in the financial income, which accounts for most of it. Taxes about 9.2%. Well, there were a number of items. They have a better position than last year. Not including Moët Hennessy and DFS, where we have minority interest, we still out of that have a minority interest, group share is EUR 5.129 billion, up 29%. It's not the record, all-time record, but the exceptional year, the other year, where we did better than that was when we pulled out of Hermès. 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, they had a very good year, operations, profit from recurring operations up 27%. There is some scope effect with Europe, but even without that, it would still be up 20%. That is quite remarkable. Perfumes and cosmetics, watches 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 profit. Selective retailing, a remarkable year, excellent for Sephora, 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 EUR 70 billion, 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 Rimowa. Inventories remain under control with growth less than that of sales. A good cash position. We have more than EUR 3 billion in confirmed undrawn credit lines, which mean 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 dark blue that the debt went up significantly last year from EUR 3.3 billion to EUR 7.2 billion, up EUR 3.9 billion. What came into that? Let me explain. We had a few acquisitions, about EUR 6.7 billion, the acquisitions of Dior, Rimowa, and minority interest in Loro Piana. Some operations, these are the main operations at Dior. In Rimowa, there was a dividend payout in cash of EUR 2.1 billion last year. The cash flow, as you can see in gray, next to the debt, the net cash flow, at EUR 4.7 billion 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 pay, and suffered an increase in working capital requirements, mostly from inventory. A good cash flow performance so that the debt was kept under control. I mean, EUR 7.2 billion, it's still pretty reasonable. Only 40% of current assets. If you look at EBITDA, that is operating income prior to depreciation, that is EUR 10 billion. 0.7 is considered by rating agencies as a reasonable number. That we have done. If we look at the dividend, that is also should be noted.
EUR 5, up 25%, which is in line with the growth in net income and cash flow, up 25% compared to last year. There was an interim dividend paid in December. The balance will be paid out on this, on the 19th of April. This is what I had to say. Thank you for your attention.
Now let's turn to the results of the questions that you put in the survey that will be presented in the form of a short clip.
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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.
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. For this, 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.
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 renown of the country throughout the world. How more practically did this unfold during the course of 2017 according to our various areas of activities? 'Cause 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. We shipped approximately 7.5 million cases that places us far and away in the lead of the cognac market. I think we're 4 x bigger than the number two player in this business. 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, Pont Neuf, where we've opened a bottling line of 2 million cases to be followed shortly by a second tranche of 2 million 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. That we seek to supply with the best qualities possible. In champagne, too, good increase, up 4% in volume terms. I'd like to mention in passing the special Cuvée Dom Pérignon. As you know, Dom Pérignon is the finest champagne in the world, recognized worldwide, one of the most iconic names, the inventor of champagne since Louis XIV. 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. It was actually an outstanding success. No, it's true. It was difficult.
The other evening, we were celebrating a birthday at my home. I couldn't get my hands on the bottle. I had to make do with Moët. In this activity, we're of course developing our in-house productions, but we're also seeking to acquire brands. This year, we acquired a small U.S. whiskey, Woodinville, and a Californian wine, extraordinary, famous Colgin. 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. It's an incredible location because by surprising happenstance, there's a lake that is nearby that is the Hennessy Lake in Napa Valley. That's quite a coincidence. If you visit California, I invite you to visit this location that's quite amazing. We also launched a tequila with a Mexican partner, Tequila Volcán.
That's off to a great start. That's for wines and spirits in 2017. 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, first and foremost, Nicolas Ghesquière, who always delivers collections of outstanding renown. 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. This year, we collaborated with Jeff Koons, the Masters collection in which you may have seen some models depicting the Mona Lisa. That's also sold out. 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. 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. Let me add that we just launched the same thing this year with Supreme and the Rimowa 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 Sèvres, which is our site, but there are only 10. You need to sign up beforehand. They're very good. They're great, they're red.
Vuitton this year also organized two major exhibitions, one in Korea, very successful, and 1 in New York that met with huge acclaim. I need to mention, of course, the inauguration and the opening of the Maison Vuitton Place Vendôme 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 Vendôme, one of the finest squares in Paris. This mansion house designed by Mansart, wonderful, has been totally renovated, refurbished, from top to bottom, and it shows the excellence of Vuitton products 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 parting, passing, outpacing its peers, an incredible success with Sauvage, its men's fragrance. We've just launched an eau de parfum version that is a big hit throughout the world, and the more traditional lines of iconic, such as J'adore and Miss Dior have met with considerable success, as well as makeup, et cetera. 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 the 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 hundred million revenues, and this year we'll probably reach EUR 500 million. Just by comparison, I see certain peers who are buying brands and paid billions 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. We did buy a brand, a brand of perfumes, Kurkdjian, w e 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 Bulgari. Bulgari that 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. Let's also mention in passing Chaumet 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.
Chaumet, one of the oldest of French jewelers on the Place Vendôme 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, two 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, notably in Southeast Asia, Hong Kong. That was 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 one.
The world's number one in terms of sales of selective retailing of beauty products on the net. We're expanding in the U.S. We've opened in Germany last year. That's a first. We've achieved considerable success in Australia. Luxola 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, Shchukin Collection, that beat all records of exhibitions in France, of whatever museum, an all-time record.
I can announce that we, in 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 Fondation Louis Vuitton. 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. 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 at LVMH. 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 things that one tends to forget. 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. We got Mr. Pietro Beccari 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, Sidney, because it won't make us feel any younger. 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.
The first piece of news that we focused on is the arrival of a new designer at Céline, Mr. Hedi Slimane. 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 as shareholders. You'll see those numbers leap with the outstanding creativity of this talented, indeed, amongst the most talented designers. We indeed set great store by him and have high hopes around EUR 1 billion. We expect it to reach EUR 2 billion, possibly EUR 3 billion. We'll see. It depends on the combined talent of its leaders and the designer. The targets have been set. Now we'll look to the results.
I also wish to say a word about Loro Piana and Berluti that delivered an excellent year in 2017 with a sharp return to growth and the finest products. Let's not forget what we've achieved with Le Bon Marché. Le Bon Marché is a flagship store in Paris that is going from success to greater success. We've opened a second épicerie on the right bank that is off to a good start. We also launched the internet platform 24 Sèvres that I mentioned earlier for the Le Bon Marché 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 at 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, offers money, paying us to lend us money. It's 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. 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 five 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 Pérignon, but it won't last forever.
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 drop sharply, we're quite well-positioned to benefit that as we did in 2007. I don't want to be defeatist, but I think we need to keep that in mind when talking about the strategy. The strategy. 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.
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. There'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. Our strategy, at the risk of repeating myself, is based on values, first and foremost amongst which is creativity. Creativity, innovation, 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 watchmaking, the Bulgari watches that are now the finest, the slimmest in the world, the Tourbillon Bulgari watch, the slimmest in existence, only a few millimeters. Of course, Louis Vuitton that shines through its continuous innovation, its new products, its creativity, its fashion shows, et cetera, and also shines through its selectivity, and that's what needs to be underscored in terms of strategy. We are selective. At Vuitton, 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, like, 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 the figures are very good, is not revenue. The fundamental goal is the desirability of the brand. 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, et cetera. 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 at prices that are not controlled.
All this, down the road, would be very detrimental to our brand, and we have a very strict policy on that front. Creativity, 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. This is an incredible strength, and it's absolutely fundamental, and that is shared by the Vuitton teams. 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 in producing them because of the ever-growing demand, but that's not our objective. Our goal is to sustain desirability, and creativity 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, that's well and good. It shows that it's hugely desirable. It's gonna prompt our teams to create another. We're not gonna produce more to generate more sales. We could double. We just have to produce more. We could double the revenue. I don't believe that's the strategy. We want to give our customers an experience, and the Vendôme store for that provides an outstanding customer experience. That's for creativity, which, as I said, is one of the pillars, one of our core values. To illustrate this, actually, I'm asked to mention many things, but I can't mention everything in the interest of time. In the clip, yes, we spoke about digital strategy. We're very much focused on our digital strategy.
We launched 24 S. We also, with Viva Technology, took part in the first LVMH Innovation Award, which is a competition that we're repeating this year. We already have 800 applications to participate, and we inaugurated three days ago, the startup house Station F, where we have a program sponsoring, supporting some 50 startups per year. 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 a 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. Second value in terms of a strategy, no change over last year is quality. We constantly focus on quality with the search for the best manufacturing processes. For this, we're opening workshop, manufacturing facilities in France. We just opened one recently with Louis Vuitton, and this allows us, as I said earlier, and 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. After 12 or 18 months, we have great teams that produce products that are the envy of the world.
Bulgari 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 third value, the entrepreneurial mindset, the spirit of enterprise that really makes the difference. 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. 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, et cetera. The group today is over 140,000 people. When I began, we were fewer than 20,000 back in the 1990s, that's quite a remarkable achievement. The bulk of our production is located in France, of course, and for that we have a recruitment policy in France that's very significant.
We hire not just managers, but also many artisans. We train them. We have great many apprentices. We have several thousand apprentices in the group. They're all in training, sometimes with work experience. In 90%-95%, we hire them after the apprenticeship for our workshops. These values rest on the transmission of our know-how and values in the group with an initiative 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. We also have exacting integrity standards. 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-beings of our models. There are many questions on that. We attract the best. For the 12th consecutive year, we're number one in the Universum index, recognized without question, and I'm informed that once again, we'll be number 1 this year. 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. Three out of four 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 know-how. 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, that we bring them from certain areas of Paris and offer them a complete change. We're very proud of that. 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 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, 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 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 a Leather Working Group certified provenance. 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.
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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 Journées Particulières. You'll have a sneak preview of that.
[Presentation]
Well, thank you for the fine work you're doing with Loro Piana, Berluti, and Les Journées Particulières. Thank you for Antoine Arnault. 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 five reports published for your attention. You have them in the 2017 registration document that you were handed out when you came in. 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, then two reports on operations regarding the company's capital.
Regarding the annual and consolidated reports, we do certify without reservation the accounts that were presented and that are put to your approval in resolutions one and two 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. In particular, we indicate the key items which, according to our own professional opinion, were the most significant in the production of the accounts. Regarding the annual accounts, it is the assessment of the redeemable shares and the provisions. We had Christian Dior Couture, assessment of fixed assets, assessment of inventories and items under operation, provisions for risks and unexpected expenses.
We, of course, have ensured that everything is done according to regulation. Now, in the report on related party agreements, there are two additional agreements which the board of directors of this company has previously approved. Number one, on the compensation to three 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. Finally, as part of the extraordinary part of this shareholders meeting, we produced two special reports on resolutions related to capital transactions.
One is on the reduction of the capital. 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's missing, and that's my friend, Pierre Godé, who left us at the beginning of the year. Alongside us for many years, 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. I wanted to pay a tribute to him.
Before we move on to the questions, we did receive questions in writing put to us by shareholders. Under, as provided by legal provisions, I'll give the floor to Mr. Kuhn, who will provide the answers of the board of directors to each of the questions. Thank you.
Three shareholders in the company sent questions in writing, for which we have the following answers. The first question was asked by Phitrust on the role of LVMH as part of the Paris Agreement after the COP21, so the commitments made by LVMH to reduce greenhouse gas emissions. 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 25th 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 the 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 IPCC and the factor four commitment by France to divide these emissions by a factor of four by 2050.
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, industry-based standards, that 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 of 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 PETA 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 1973 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 Heng Long tannery in Singapore has stopped all purchase of animal use in Vietnam, where reprehensible practices were found. 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 1/3, 33% for the associate CEO. For the qualitative aspects, in the environment, has pride of place. 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 self-same 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.
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 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. It doesn't appear necessary to create specific representation for customers of LVMH on the board. Well, thank you. 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 your questions. Please introduce yourselves before asking your questions. Are there any questions at all? Yes, number eight.
Good morning. My name is Jack Viba. I'm an individual shareholder. I would like to know about the Samaritaine project. How, 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 Samaritaine has remained closed for 10 years, thanks to various attacks that we suffered, criticism, conflicting court 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 thousand people working in the new, revamped Samaritaine. This is, of course, totally independent of our will. There you have one piece of property in the heart of Paris and 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 [Dessoulange], and I represent an association of individual shareholder. Mr. CEO, a couple of question. Well, 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 Heuritech 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? A 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 cosmetics purposes, and if not, why not? A third question, if I may, we know that you're concerned about your CSR policies. What's your policies vis-à-vis stakeholders? Are you proposing to create a committee of stakeholders that would report annually to the board? Thank you.
First question, Heuritech is a startup, we saw them again last week at Station F. That company business is to work on deep learning in the sales in our stores. 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.
ModiFace is a company which we did consider. It's a, it's a, it's a fine company. We do work with them. 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. 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 left with only one customer, the internal customer. 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. That would, of course, run counter to this. The last question, our stakeholders, we're close to them. I don't think we need to add 1 additional layer with committees. We have, I mean, if you want to raise questions straight to us, you can do this. Creating another committee, I don't believe in that. Are there further questions?
Hello, my name is Stevie Langlois. 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. Apparently, there were not enough to go around. That's a comment. I'm sure it will be sent by the club, but that will be too late with that. I would have liked to have it before the meeting. A question, might it not be possible through the shareholders club to organize visits of the Samaritaine construction site? Thank you.
Regarding Samaritaine, we certainly intend to include Samaritaine in the Journées Particulières, and the shareholders club has a special access. That is quite possible. Regarding the annual report, there were copies, we thought we had enough, it has been online for three weeks now, as provided by law.
Bonjour. Hello. My name is [Goldham] from Fashion Network. I have three questions. 24 Sèvres , is this part of fashion and leather goods or selective retailing? There are not that many products sold there. What's the sales of that 24 Sèvres? A second point, Mr. Guiony referred to Said that the touch space, the touchstone of your organization is recurring operating profits from recurring operations. 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 remained the same.
You said that your group can be present in several industries, several sectors, but the priority remains with Vuitton. Are you not concerned about the future? Because finally, this is, in a way, your flagship brand, and it keeps a private place in your accounts. A third 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?
24 Sèvres 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, sir, 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. I'm no more concerned now than I was 20 years ago. I remember when I took over LVMH in the early 1990s, we were told, "Sir, there's one problem with LVMH, and that is Vuitton." I said, "Really?" "Vuitton is too big. It takes too much, it takes too much place. It sells too many products. This cannot go on." Look where we stand 20 years down 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 fashion-fashionable, that is. Further question?
Mr. President, good morning. Gunnar Allé, I'm an individual shareholder. I may sound a bit greedy, when the dividend stands at EUR 5, which is quite huge in absolute numbers, 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. Another point, do you propose to have to divide the value of a share? Are you consider a share split? For shareholders, could you are you considering the giving out of free shares or some sort of a share subsidy?
Well, on profitability, 1.7% is not so bad. When I put my money in the bank, the bank asks me to pay them. I'd rather have LVMH shares and earn and get my 1.7%. 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 five years from now. The share splitting, I'm not in favor. When our shares are worth the size, about the size of that of Mr. Buffett's, then we might reconsider, but now, not really.
Good morning, sir. Christian Despriy, I'm an individual shareholder. Is it not the case that your real competitors are not so much in luxury industry, but the GAFAM? What's your view on GAFAM's M, standing for Microsoft?
That question is a bit out of order, isn't it? I mean, we sell products, not data. Our business is very different. The only comparison, but I do make the comparison because we often say it, 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 GAFA or indeed GAFAM, as you pointed out, we're tiny, we're 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. That is the comparison I can accept. We do not sell data. We sell products.
My name is Madame Boutard. 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, Nicolas Ghesquière are delighted to dress the First Lady. This has no commercial effect. We're the number one house of couture. We are the number one brand in the world, and she doesn't wear only Vuitton, but we're delighted to provide clothes to the lady, 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. Look, the time has come for us to vote on the resolutions. First resolution, approval of the parent company financial statements 2017. Please vote. [Non-English content ]
We're going to vote again. I believe we suffered a slight technical hitch. First resolution.
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Second resolution, approval of the consolidated financial statements. Please vote.
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Approval. Resolution number three, dividend.
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Approved. Fourth resolution, related party agreements. Please vote.
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Approved. Fifth resolution, renewal of Mr. Antoine Arnault's term of office. Please vote.
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Approved. Well done, Antoine. Renewal of Mr Bazire's term of office as Director.
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Approved. Well done, Nicolas. Renewal of the term of director Mr. Charles de Croisset. Please vote.
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Approved. Well done, Charles. Renewal of Lord Powell as director. Please vote.
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Well done, Charles. Resolution nine, renewal of Mr. Yves-Thibault de Silguy's term as director. Please vote.
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Approved. Well done, Yves-Thibault. 10th resolution, approval of the items of my compensation. Please vote.
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Approved. Items of compensation of Mr. Belloni. Please vote.
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Approved. Compensation policy for company officers. Please vote.
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Approved. Authorization to be granted to the board to trade in the company shares. Please vote.
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Approved. Authorization to the board to reduce the share capital. Please vote.
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Approved. Resolution 15, authorization to the board to award bonus shares. Please vote.
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Approved. 16th and final resolution, amendments to the bylaws. Please vote.
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Approved. Thank you for your attendance, and let me point out that a gift will be given to you as you leave.