HERMÈS - 2018 Registration document

6

Parent company financial statements

Notes to the financial statements

1.8 Post-employment and other employee 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 cal- culated 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.

Benefits are partly funded in advance by external funds (insurance com- panies). Assets held in this way are measured at fair value. The expense recognised in the statement of profit or loss is the sum of: s s the service cost, which reflects the increase in obligations arising from the vesting of one additional year of benefits; and s s the interest cost, which reflects the increase in the present value of 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.

OPERATING INCOME

NOTE 2

2018

2017

In millions of euros

Revenue

247.6

216.6

Other products

0.8

0.7

Reversals of provisions and expenses reclassified

63.8

67.4

Operating income

312.1

284.7

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 adver- tising and public relations services, rent, staff provided on secondment, insurance and professional fees. Provision reversals and expense transfers amounting to €63.8 mil- lion comprised reversals of provisions for €7.8 million and transfers of expenses for €56.0million, mainly linked to free shares plans granted to employees of subsidiaries.

In 2017, the €67.4 million in provision reversals and expense transfers included an expense transfer for €65.1 million linked to the cost of free share plans.

COMPENSATION AND OTHER PERSONNEL COSTS

NOTE 3

2018

2017

In millions of euros

Compensation

53.5 21.6

49.4 19.8

Social security expenses

Cost of shares issued to employees of Hermès International (2012 plan)

1.5 0.1 8.1

1.0 0.2 8.1

2012 free share plans 2016 free share plans

COMPENSATION AND OTHER PERSONNEL COSTS

84.8

78.5

Expenses recognised in respect of free share plans only concern employees of the Company. The costs relating to other beneficiaries are presented in extraordinary income.

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2018 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL