HERMÈS - 2019 Universal Registration Document

PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

Post-employment and other employee

Benefits are partly funded in advance by external funds (insurance companies). Assets held in this way are measured at fair value. The expense recognised in the statement of profit or loss is the sum of: the service cost, which reflects the increase in obligations arising s from the vesting of one additional year of benefits; and the interest cost, which reflects the increase in the present value of s the obligations during the period. Accrued actuarial gains and losses are amortised when they exceed 10% of the obligation amount, gross of dedicated investments, or of the market value of these investments at year-end (“corridor” method). Amortisation of these gains and losses starts from the year following the year in which they were initially recognised and continuing over the average residual duration of employment of the employee.

Note 1.8

benefit obligations For basic pension and other defined-contribution plans, Hermès International recognises contributions to be paid as expenses when they come due and no provision is accrued in this respect, as the Company has no obligation other than -the contributions paid. For defined-benefit plans, Hermès International’s obligations are calculated annually by an independent actuary using the projected credit unit method. This method is based on actuarial assumptions and takes into account the employee’s probable future length of service, future salary and life expectancy as well as staff turnover. The present value of the obligation is calculated by applying an appropriate discount rate. It is recognised on a basis pro-rated to the employee’s years of service.

OPERATING INCOME

NOTE 2

2019

2018

In millions of euros

Revenue

315.0

247.6

Other products

0.7

0.8

Reversals of provisions and expenses reclassified

87.4

63.8

Operating income

403.1

312.1

Provision reversals and expense transfers amounting to €87.4 million comprised reversals of provisions for €4.0 million and transfers of expenses for €83.4 million, mainly linked to free shares plans granted to employees of subsidiaries. In 2018, the €63.8 million in provision reversals and expense transfers included provision reversals for €7.8 million and expense transfers for €56.0 million linked to the cost of free share plans.

The Company’s revenue consists of services and royalties from brands. Royalties are calculated based on the production subsidiaries’ revenue. Services are primarily amounts charged back to subsidiaries for advertising and public relations services, rent, staff provided on secondment, insurance and professional fees.

COMPENSATION AND OTHER PERSONNEL COSTS

NOTE 3

6

2019

2018

In millions of euros Compensation

(62.7) (25.2)

(53.5) (21.6)

Social security expenses 2012 free share plans 2016 free share plans 2019 free share plans

-

(1.5) (8.1)

(8.6) (4.3)

-

COMPENSATION AND OTHER PERSONNEL COSTS

(100.8)

(84.8)

Expenses recognized in operating income in respect of free share plans only concern employees of Hermès International. The costs relating to other employee beneficiaries of subsidiaries are presented in extraordinary income.

2019 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

357