HMfull
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I. OVERVIEW
The company:
H&M Hennes & Mauritz is a Swedish multinational retail-clothing company, known
for its fast-fashion clothing for men, women, teenagers and children.
H&M exists in 57 countries with over 3,500 stores and as of 2015 employed around
132,000 people. The first store was opened on the high street of Vsters, Sweden in
1947. It had 2,325 stores at the end of 2011, 2,629 stores at the end of August
2013 and opened its 3,000th store in September 2014 in Chengdu, China. It is ranked
the second largest global clothing retailer, just behind Spain-based Inditex (parent
company of Zara), and leads over the third largest global clothing retailer, United
States based Gap Inc.
The design team in the company's Sweden office controls the steps of production, from
merchandise planning to establishing specifications, and production is outsourced to
approximately 800 factories in Europe and Asia. These facilities are used for
horizontal division of labor, rather than being integrated.
Business concept:
H&M offers a broad and varied range that allows customers to find their own personal
style. The collections are created with H&M's broad clientele in mind and the aim is to
satisfy many different tastes and requirements. The range includes everything from
modern basics to high fashion reflecting the very latest international trends. The
collections are supplemented by matching accessories, nightwear, underwear and
cosmetics.
To H&M, design, quality and sustainability are not a question of price: They always
offer inspiring fashion with unbeatable value for money.
Quality is a central topic, from initial idea to final product. It is their aim to always
exceed our customers expectations on quality.
An important element of their strong offering is that H&M should be the more
sustainable choice. Considerable resources are devoted to increasing sustainability.
H&M does not own factories, but instead buys products from independent suppliers
that are close long-term partners of H&M. They work to bring about long-term
improvement for people and the environment in the supply chain, the garment
lifecycle and the communities in which they are active.
II, FINANCIAL PERFOMANCE
billion including VAT. Profit for the year after tax, before the allocation to HIP,
increased by 18 percent to over SEK 20 billion. Well-received collections for all our
brands and continued strong expansion both in stores and online have helped increase
our market share and have further strengthened our position in the market. We created
16,000 new jobs within the H&M Group in 2014 and now have more than 132,000
employees. Our employees and the H&M spirit our shared values are the key to
our success, and the good financial results for the year mean that SEK 303 m has been
allocated into the H&M Incentive Program (HIP). HIP is for all employees in the
H&M Group and aims to acknowledge the employees daily and long-term
commitment. As always, we worked on continuous improvements during the year in
order to be a leader in everything we do and the preferred choice for our customers.
We have made many long-term investments in IT, online sales, new brands and in
broadening the product range. Additionally, our extensive sustainability work is a
further example of how we give customers added value. Our customers should always
know that when they shop with us, the product has been produced with the greatest
possible consideration for people and the environment. While we are continuing our
long-term investments, at the same time we can see our investments in areas such as
online starting to bear fruit. This year we opened our online store in four new large
markets: France, Italy, Spain and China. These openings, combined with further
improvements in our online store, have naturally contributed to the years good sales
development. We will therefore be rolling out H&Ms online store to nine new markets
in 2015: Belgium, Bulgaria, the Czech Republic, Hungary, Poland, Portugal, Romania,
Slovakia and Switzerland. In 2014 we opened a net addition of 379 new stores which
is more than one store a day. And in 2015 we will be opening even more stores; in
total, we plan a net addition of around 400 new stores. New markets planned for 2015
are Taiwan, Peru, Macau, South Africa and India. The greatest expansion will take
place in existing markets where there is still great potential to grow further. The most
new stores will open in China and the US, but also in other large markets such as
Poland and Germany. COS and & Other Stories plan to open even more stores this
year than in 2014. Early in 2014 we successfully launched H&M Sport, and in the
autumn our expanded shoe range was gradually launched in selected H&M stores and
online. As a further step in broadening H&Ms product range, in autumn 2015 we will
start the launch of H&M Beauty a new and broad concept for make-up, body care
and hair care with high quality value-for-money products in a specially produced
design that we have great belief in. H&M Beauty, which will replace our current
ownbrand cosmetics, will be launched already this year in approximately 900 H&M
stores in around 40 markets as well as in our online markets. We have another exciting
year ahead of us, with new opportunities and challenges. 2015 has got off to a good
start, with strong sales in both December and January. Although the increasingly
expensive US dollar will affect our sourcing costs, we will make sure that we always
have the best customer offering in each individual market in terms of fashion, quality,
price and sustainability, which form the basis of our business idea.
Full year 2014
176,620
150,090
151,419
128,562
25,583
22,090
Operating margin %
16.9
17.2
25,895
22,448
Tax
Profit after tax, SEK m
-5,919
19,976
-5,355
17,093
12.07
10.33
9.75
9.50
Sales
Well-received collections for all brands and continued strong expansion led to
increased sales and continued market share gains for the H&M Group in a fashion
retail market that in many markets was still characterised by a challenging
macroeconomic situation and also by unusually warm autumn weather.
Sales including VAT converted into SEK increased by 17 percent to SEK 49,656 m
(42,610) in the fourth quarter. Sales including VAT increased in the financial year by
18 percent and amounted to SEK 176,620 m (150,090). Sales excluding VAT increased
by 17 percent to SEK 42,644 m (36,495) in the fourth quarter and by 18 percent to
SEK 151,419 m (128,562) during the financial year 2014. Sales including VAT in local
currencies increased by 11 percent in the fourth quarter and by 14 percent during the
financial year 2014.
and 14 percent in local currencies compared to the same time the previous year. The
increase in the stock-in-trade is mainly due to the store and online expansion. The level
and the composition of the stock-in-trade as of 30 November 2014 are deemed to be
good. The stock-in-trade amounted to 12.8 percent (13.0) of sales excluding VAT and
25.7 percent (25.4) of total assets.
Tax
The H&M Groups final tax rate for the financial year 2013/2014 was 22.9 percent
(23.9). The final outcome of the tax rate depends on the results of the Groups various
companies and the corporate tax rates in each country. The H&M Groups tax rate is
expected to be approximately 22.5 23.5 percent for the financial year of 2014/2015.
However, in the first three quarters of 2015 an estimated tax rate of 23.5 percent will
be used.
Employees
The average number of employees in the Group, converted into full-time positions,
was 93,351 (81,099), of which 7,489 (6,868) are employed in Sweden.
Parent company
The parent companys external sales amounted to SEK 47 m (35) in the financial year.
Profit after financial items amounted to SEK 16,248 m (16,998). Investments in fixed
assets amounted to SEK 274 m (161). previous year. Sales in January 2015 are
expected to increase by 14 percent in local currencies compared to the same month last
year.
III, Ownership structure
At the end of the financial year H&M had 204,754 shareholders. The total number of
shares in H&M is 1,655,072,000 (the market price of each share is SEK 319,4), of
which 194,400,000 are class A shares (ten votes per share) and 1,460,672,000 are
class B shares (one vote per share).
Shareholders include person, families and organizations. There are 10 largest
shareholders of H&M.
NAME
NUMBER OF
% OF TOTAL
% OF VOTING
SHARES
SHARES
SHARES
623,849,332*
37.69
69.71
88,080,400
5.32
2.59
ALECTA PENSIONSFRSKRING
67,650,000
4.09
1.99
37,568,801
2.27
1.1
32,006,420
1.93
0.94
28,928,396
1.75
0.85
JPM CHASE NA
21,900,665
1.32
0.64
HANDELSBANKEN FONDER AB RE
17,696,104
1.07
0.52
FJRDE AP-FONDEN
15,041,653
0.91
0.44
13,630,627
0.82
0.4
W8IMY
JPMEL
H&Ms largest shareholder is Stefan Persson and family, who via Ramsbury
Invest AB hold all the class A shares, which represent 57.1 percent of the
votes, This means that as of 30 Novem- ber 2014, Stefan Persson and family
via Ramsbury Invest AB repre- sent 68.6 percent of the votes and 35.5 percent
of the total number of shares. Ramsbury Invest AB is thus the parent company of
H & M Hennes & Mauritz AB.
According to the brand performance taken on 31st DEC 2014, the brand value of H&M
is $14,715m; the enterprise value is $65,812m.
Board meetings
During the financial year H&M normally holds six regular Board meetings, one of
which is the statutory Board meeting. Extraordinary Board meetings are held when the
need arises. The Board consists of eight ordinary members elected by the Annual
General Meeting. There are also two employee representatives, with two deputies for
these positions. Seven members of the Board are women and five are men; four of the
twelve are employed by the company. The Board is assisted by a secretary who is not a
member of the Board.
The Board meetings begin with a discussion of the company s financial situation,
with costs and sales as the main focus. The Board goes through the various financial
reports and the Annual Report and verifies these before they are published. The Board
meetings also discuss matters such as overall strategy, expansion and dividend policy.
The Managing Director attends meetings of the Board in order to report on the
operational work within the Group and ensures that the Board is given relevant and
objective information on which to base its decisions.
Attendance at the Board meetings is very good and the members participate in all
discussions. Accounting matters are dealt with in detail within the Auditing Committee
and reported back to the Board.
Board of directors
Stefan Persson
Chairman of the Board
Born
Year Selected
Primary occupation
1947
1979
Other significant board assignments: Member of the Association of MSAB and board
assignments in family-owned companies.
Education: Stockholm University & Lund University, 19691973.
Work experience:
1967-1982
1982-1998
1998
Shareholding:
0
Shares held by related parties:
194,400,000 A-shares as well as 393,049,043 B-shares owned through Ramsbury
Invest AB.
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance:
No
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance:
No
Anders Dahlvig
Board member and member of the Auditing Committee
Born
Year selected
Primary occupation
1957
2010
Board assignments
Other significant board assignments: Chairman of the New Wave Group. Member of
the Board of Kingfisher plc, Oriflame SA, Axel Johnson AB, Resurs Bank AB and Pret
A Manger.
Education:
Bachelor of Science degree in Business Administration, Lund University 1980
Masters of Arts degree in Economics, University of California Santa Barbara, 1982
Work experience:
1983-1993
1993-1997
1997-1999
1999-2009
Shareholding
17,510
Shares held by related parties
0
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance
Yes
Lottie Knutson
Board member
Born
Year selected
1964
2006
Primary occupation
Writer and advisor within digital marketing, change and
crisis management.
Other significant board assignments: Member of the Board of Stena Line Holding BV,
Cloetta AB, Swedavia, STS Alpresor and Wise Group AB.
Education:
Universit de Paris III, Diplme de Culture Francaise, 1985-1986. Theatre history,
Stockholm University, 1989, The Department of Journalism at Stockholm University,
1987-1989.
Work experience
1988-1989
1989-1995
1995-1996
1996-1998
1998-1999
1999-2014
Shareholding
1,400
Shares held by related parties
0
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance
Yes
Sussi Kvart
Board member and member of the Auditing Committee
Born
Year selected
1956
1998
Primary occupation
Consulting, with a focus on strategic business advice,
corporate governance and board procedures.
19831989
19891991
19911993
19931999
19972001
20002001
2002
Shareholding
Sussi Kvart AB
4,400
Shares held by related parties
1,700
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance
Yes
Year selected
Primary occupation
1969
2014
Education
Design and Marketing at Parsons School of Design in New York and at the American
University in London.
Work experience
19931996 Buying & Product Development at H&M
19961998 Global Communications Manager, J.Lindeberg
1999
Shareholding
0
Shares held by related parties
700 shares are owned by Lena Patriksson Kellers private company Verdani Holding
AB. 9,450 shares are owned by husband and children.
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance
Yes
Melker Schrling
Board member
Born
Year selected
1947
1998
Primary occupation
Founder and owner of MSAB.
LM Ericsson, Mexico
19751979
19791983
19841987
19871992
19931997
Shareholding
0
Shares held by related parties
228,000 *
* Shares owned through Melker Schrling AB
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Christian Sievert
Board member and Chairman of the Auditing Committee
Born
Year selected
1969
2010
Primary occupation
CEO investment company AB Max Sievert
1997-2003
2003-2013
2013-2014
Partner Segulah
2014-
Shareholding*
56,000
Shares held by related parties
4,000 shares are owned by Christian Sieverts company Whitechris Industri AB, 600
shares owned by spouse.
* Additional information: In addition to Christian Sieverts shareholding shown above,
Christian Sievert holds 5,000 H&M shares via a pension plan.
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance
No*
* Christian Sievert is not considered independent of Ramsbury Invest AB since
Ramsbury.
Niklas Zennstrm
Board member
Born Year
Primary occupation
selected
1966 2014
CEO of venture capital company Atomico, which focuses on fastgrowing tech companies, and involved in Zennstrm Philanthropies,
which supports organisations particularly associated with climate
change, social entrepreneurship, the Baltic Sea environment and
human rights.
1994
1994
1996
1996
1997
1997
2000
Luxembourg/Amsterdam
2000
2002
2001
2003
2002
2007
2007
Shareholding
72,700 shares
Margareta Welinder
Employee representative
Born
Year selected
1962
2007
Shareholding
0
Shares held by related parties
0
Ingrid Godin
Employee representative
Born
Year selected
1959
2012
Shareholding
0
Shares held by related parties
60
Rita Hansson
Deputy employee representative
Born
Year selected
1951
2014
Shareholding
300
Shares held by related parties
0
Alexandra Rosenqvist
Deputy employee representative
Born
Year selected
1976
2015
Shareholding
0
Shares held by related parties
0
V, ANNUAL GENERAL MEETING 2015
H&Ms Annual Meeting 2015 was held at Victoriahallen, Stockholm International
Fairs in Stockholm on Wednesday 29 April, at 3 p.m. 1,721 shareholders were
represented at the meeting, representing 82.3 percent of the votes and 64.7 percent of
the capital.
The main resolutions passed were the following:
The lawyer Sven Unger was elected as chairman of the meeting (75.3 percent
of the votes in H& M Hennes & Mauritz AB).
Balance sheets and income statements for the parent company and for the group
were adopted.
A dividend to shareholders of SEK 9.75 per share was approved. May 4, 2015
was decided as record date. With this record day, Euroclear Sweden AB is
expected to pay the dividend on 7 May 2015. To be guaranteed dividend
payment, the H&M shares must have been purchased no later than 29 April
2015. Ex-dividend day is 30 April 2015.
The board members and the CEO were discharged from liability for the
2013/2014 financial year.
The number of board members elected by the meeting to serve until the next
AGM was set at eight, with no deputies.
Anders Dahlvig, Lottie Knutson, Sussi Kvart, Lena Patriksson Keller, Stefan
Persson, Melker Schrling, Christian Sievert and Niklas Zennstrm were reelected by the meeting. . Stefan Persson was re-elected as chairman of the board.
The nomination committee proposes that the board fees for each member
elected by the general meeting are distributed as follows: chairman of the board
SEK 1,550,000; members SEK 550,000; members of the auditing committee an
extra SEK 125,000; and the chairman of the auditing committee an extra SEK
175,000. If the meeting approves the nomination committees proposal for the
composition of the board, and if the number of members of the auditing
committee remains as before, the total fees will be SEK 5,825,000, which is an
increase of SEK 300,000.
The proposed principles for the nomination committee were approved and
members of the nomination committee were elected.
The proposed guidelines for remuneration to senior executives were approved.
VI, AUDITORS
Auditors
At the 2013 AGM, the accounting firm Ernst & Young AB was elected as
auditor of H&M for a four-year period, i.e. until the end of the 2017 AGM.
Authorised public accountant sa Lundvall from Ernst & Young holds the main
responsibility for the audit.
Ernst & Young Global Limited (known as EY) is a multinational professional
services firm headquartered in London, United Kingdom. It is one of the "Big
Four" audit firms and is the third largest professional services firm in the world
by aggregated revenue in 2014, after Deloitte and PwC. Ernst & Young AB is a
member of a global network used for auditing assignments for most of the
groups companies and meets H&Ms requirements with respect to competence
Total
Group
2014
2013
24.1
2.7
20.8
2.4
14.1
1.1
13.2
0.9
4.0
46.0
3.6
40.9
Parent company
2014
2013
3.3
0.6
0.4
4.3
3.3
0.4
0.1
3.8
Supplementary guidelines
In addition to the general guidelines, the Board has prepared supplementary guidelines
for certain managers, which are primarily aimed at executive management but also at
certain other key individuals. The Chief Executive Officer is not, however, included in
the supplementary guidelines. Overall, around a third of the senior executives who are
covered by the above mentioned general guidelines are also covered by the
supplementary guidelines.
The supplementary guidelines are based on a stay on board principle, which means
that the remuneration linked to the supplementary guidelines is conditional upon the
senior executive remaining employed within the H&M Group for at least five years.
Provided that the 2014 AGM approves the programme, the five-year rule applies from
and including May 2014 up to and including May 2019.
Cash remuneration in 2019
Provided that the stay on board principle is fulfilled, the senior executives covered
by the supplementary guidelines are entitled to a cash payment after five years.
At individual level, the cash payment may vary between SEK 0.5 m and SEK 5 m net
after tax; the exact distribution per individual will be decided by the CEO and the
Chairman of the Board.