Message from the Chair – Address of Nayla Hayek, Chair of the Board of Directors of the Swatch Group, to the 2015 General Assembly of the Swatch Group Shareholders on May 28, 2015, at the Velodrome, Neumattstrasse 25, Grenchen, Switzerland.
The spoken word in German is valid.
Dear Madam, Dear Sir, Dear Fellow Shareholders,
“Construction site”… a term often used to identify an area where there are still problems to solve. I would like to use it in the way Swatch Group sees it: building, creating something new, developing, improving, taking the bull by the horns. Luxury and red carpets are only possible with the benefit of a sound basis – a firm foundation that is the fundamental prerequisite for any construction. Within Swatch Group, here in Switzerland, we have many construction projects under way. And we are proud of them! Every day, hundreds of feet in rubber boots trudge through the mud at these construction sites. Hundreds and hundreds of hands tackle tasks, mix the concrete, operate the diggers and the cranes, mill, sand, do carpentry, plastering, painting… or they build scaffolding and sanitary facilities, lay electric cables, install machines. This is about the many additional jobs that Swatch Group – along with the 2100 additional positions (including the 770 in Switzerland) that the company created internally in 2014 – supports and develops. Here, in Switzerland, because it is here that we produce, here that we build factories and here that we renovate, modernize and develop them. Because it is also here, in Switzerland, that we want to be established and to manufacture in the future. For you, for us, for industry, for the region and through this, for Switzerland. Because to us, the idea of “outsourcing abroad” is utter nonsense.
You may remember that in 2013, we completed the construction of big production sites in Grenchen (SO), in Villeret (BE) and in Boncourt (JU). Last year, we built in SaintImier (BE), in Lengnau (BE), in Le Locle (NE), in Fontaines (NE), in Coldes Roches (Le Locle) and finally in Biel / Bienne (BE) as well.
Now, if your fingers are twitching and you are sorely tempted to build a factory yourself… this also isn’t too big a deal for Swatch Group. We are the masters of miniaturization – so we have carefully reduced the construction elements. Well, see for yourself and build your own Swatch Group factory in Switzerland! You won’t even need rubber boots to do it; you only need the cut-out sheet that is included in each annual report.
Maintaining production in Switzerland and remaining profitable also means staying ahead of the game in terms of quality and development. This cannot happen without excellent products and cutting-edge skills. For this reason, in addition to infrastructure, we also invest in research; we deal with high-performance electronic chips, completely innovative batteries, touch screens, solar panels, antimagnetic and other materials; we examine, we explore, we review… and, of course, we also invent. In 2014, we registered a new patent on average every two days.
Speaking of the latest skills, we have also always invested in training. Swatch Group employees have bright prospects here: we train several hundred apprentices and then offer them stable employment; and young people as well as experienced professionals continue to learn or specialize in the course of their careers. With Blancpain and Jaquet Droz leading the way, we also make an enormous investment in the preservation of ancient crafts that are essential to the watchmaking industry.
That’s how we strengthen industry in our country. That’s how we shape a future for our current and future employees. Goethe said it perfectly: “Success has three letters: ACT*”. And “act” means getting your feet muddy, even when it’s raining, pulling on your boots and rolling up your sleeves. One last thing concerning training: in November 2014, the Hans Huber Foundation paid tribute to our way of “acting” in the field of professional training with a national recognition award. During the award ceremony, Swatch Group was referred to as the “most important training company in the watchmaking industry” and as such, “an example to follow”. The professional training within Swatch Group was judged practical, appropriate, creative and free from any prejudice. We are delighted with this award.
Speaking of recognition – I would like to mention here and now that I am quite pleased knowing that we obviously still are one of the largest “family companies” in Switzerland. Most of all, that we have preserved the soul of a family company, also thanks to you. You encourage us with your presence and you keep faith with us every year all over again – merci! We get many positive letters from shareholders. I sincerely thank you for this. Yes, Swatch Group is a pearl as my father once said, and as a shareholder also recently expressed in a message.
I intended to have a short speech today. Yes, shorter than usual since the new regulations force us to take so many votes this year that our heads will be spinning. Of course Swatch Group is compliant with all rules and therefore today’s Annual General Meeting will be by-the-book till the end, with the help of you all. Because of that and in order not to take too much of your time, I intended to be brief. On the other hand it is also my duty to give you an overview over the past year.
So let’s have a look at our results in 2014: once again this year, we achieved a record turnover – which itself is an achievement in the current difficult climate. Gross sales reached 9.219 billion Swiss francs, a 4.6 % increase compared to 2013. Also the net income is extraordinary, even though it is a bit below the previous year which is mainly due to the Tiffany compensation. And yet, recording a net income of 1.416 billion Swiss francs (and a return on net sales of 16.3 % of the net sales of 8.709 billion Swiss francs), along with an operating profit of 1.752 billion Swiss francs, meaning an operating margin of 20.1 %, is remarkable for an industrial company in the current difficult economic environment.
When I say difficult environment – you know something really bothers me. We repeatedly went through exchange rate fluctuations over the years; we swallowed them. In times past it was the Lira or the French Franc, or it was the Yen, then the Dollar, a bit of everything. We coped with everything and made the best out of each situation. But when our own National Bank, out of despondency, forsakes Switzerland as a work place, it hurts.
I would like to quote something from the AGM speech of my father from 1995, twenty years ago:
“Yet It Does Move!” said Galileo Galilei in the 16th or 17th century. He repeated over and over again that the earth was round and that it moved. The inquisition forbade him under threat of torture to continue saying it. I would by no means want to compare myself to Galileo Galilei, and our government, the finance establishment and some economic journalists count no doubt among the most liberal, most democratic there are worldwide. That is the reason why I dare repeat today, loudly and clearly and without any fear that the Swiss franc is overvalued. It takes on more and more the character of an “escape” currency, or a “safe haven” currency if you prefer to call it that. In the middle and long term this Swiss Franc message damages the large majority of the Swiss industry. This means each of us –you as well.”
Back to the numbers of the year 2014 and to our equity: We remain as robust as in the past in terms of equity: 10.674 billion Swiss francs, corresponding to an 83.7 % equity ratio – how many companies do you know with an equity ratio like that?
Given the good results in 2014 and the prospects that we con sider positive for 2015, at the General Assembly on May 28th 2015, the Board of Directors of Swatch Group will propose the same dividend as those for the record year in 2013: CHF 7.50 per bearer share and CHF 1.50 per registered share.
Among the striking achievements in 2014, and in addition to our many construction projects, at the end of November, we acquired the Peterhof building on the Bahnhofstrasse in Zurich. This is one of the most emblematic buildings in the famous shopping precinct. With its distinctive neoGothic style, this historic edifice is one of the most beautiful in Zurich and remains in Swiss hands thanks to Swatch Group. You might have guessed that we already have some ideas about what we could do in this building.
Taking account not only of the business aspects but also being involved in a wider context is a constant concern for us. With this in mind, our watchmaking brands consistently focus on environmental protection. Notably, Blancpain is involved in the preservation of the seabed and has strengthened its commitment to the oceans with the launch of its new Blancpain Ocean Commitment campaign in Cap d’Antibes.
The art and intangible values that make our world a better place to live are also not overlooked. With their involvement, Breguet and Glashütte Original have a fairly classic approach. This has resulted in our presence with Breguet in Paris, for example, where the brand emphasized its passion for cultural heritage and where in December it reinforced its partnership with the prestigious Louvre Museum.
Swatch supports art in its most contemporary aspects: thus in autumn, we yodeled on the Bund in Shanghai – yes, I promise you! But above all, every year, about 50 contemporary artists have an opportunity to develop their art and consider things from a different point of view at the Swatch Art Peace Hotel. There would still be so many more things to say about the Swatch Group companies. We invite you to discover them in the 2014 Annual Report!
The saying “do a good job and tell the world” is not my style at all. However, I would particularly like to share this with you today. Perhaps because discussions in the past few months have been exclusively focused on subjects such as currencies, the drop in profits, the share price or, simply expressed, other even more complex subjects.
We are aware of our social responsibility, not only with regard to jobs in Switzerland. Every year, Swatch Group supports many people in need: People in the Philippines who lost everything; children in the Gaza strip; children whose eyes have been saved thanks to Orbis International and Omega; countless people with mental health problems who receive support thanks to Harry Winston. Through our brands, we also help fund various research programs in the fight against disease, especially in the field of pediatrics. We provide support to a number of organizations designed to help children. This includes children who grow up in difficult circumstances, sick children, child victims of violence and children who live in deprived economic conditions. Through these organizations, children in countries such as Brazil, the United States, Japan and China secure the chance of a better future. Longines, Harry Winston, Swatch and Mido are very involved in these projects.
This fills me with gratitude, dear Shareholders. I am grateful that we, and all of you with us, are also in a position to give a little something to the needy and to victims of circumstance.
To conclude I would like to quote from another speech of my father. Lately the address given in 1997 at Vorort, today’s Economiesuisse, fell into my hands again. Some 18 years ago we heard him say:
“It is of immense importance to convey to young people the vision that genuine, sustainable wealth can only be generated if they create new products, new factories, new companies, new added-value in jobs, and not through financial speculations. Genuine added value will then show sooner or later in higher share prices….”
Allow me a remark here: In the year 1997 the share price of the bearer share was just under 100 Francs - last year, the lowest share price was quoted at 417 Francs and 10 cents! And the registered share price amounted to some 23 francs in 1997, last year the lowest quote was at 75 francs and 35 cents!
Back to my father’s quote: “… it is as well enormously important that we keep a wary eye on society and continuously question its partly flagging mentality and attitude! To swim against the current when it flows in the wrong direction requires courage, strength and endurance, moral conviction…”
Courage, strength and endurance, moral conviction, ladies and gentlemen, have always been attributes of this Group. We will continue this philosophy, you and I, we all.
I would particularly like to thank the Board of Directors, the Executive Group Management Board and the Extended Group Management Board, all our 35 500 colleagues in Switzerland and across the world, who every day, make Swatch Group a company which acts, which lives and which gives the term “construction site” a magical meaning. And finally, my thanks to all of you, dear Shareholders, for your loyalty and support.
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