Message from the Chair

Message from the Chair
Swatch Group

Message of Nayla Hayek, Chair of the Swatch Group Board of Directors on the occasion of the Annual General Meeting of May 11, 2016, at the Velodrome in Grenchen (SO), Switzerland.

The spoken word (in German) is valid 

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Dear Fellow Shareholders, 
Dear Madam, Dear Sir, 

As you can see in our Annual Report and on the special watch that is intended only for those of you participating in the General Assembly, much of my speech today will focus on our patents, innovations and investments in the future.

We are extremely proud that we have once again achieved a record of nearly 200 new patents registered in 2015. Patents are essential, but what is even more important is that they enable us to create products. And what products, which – above all – are made in Switzerland!

In the authoritative Duden dictionary, the German noun Patent is defined as a protection title, a means of protecting an invention. The key synonym provided for the related adjective patent is tüchtig, a richly layered term that can be variously translated in English as smart and competent. And I wish to state here without a trace of false modesty that, yes, Swatch Group and its inventors demonstrate all the qualities summed up in that one word. No less than 1800 patent families duly protect our inventions at the international level.

CH 638 073: such is the common-looking reference for one of Swatch Group’s most important patents, registered by ETA in 1981. Behind these ordinary letters and numbers lies the “control mechanism for watches with an analog display”. As you are doubtless aware, the concept underlying this patent was Swatch: the timepiece that gave the Swiss watchmaking industry renewed hope and subsequently a much needed new lease on life.

At the end of the 1970s, nobody would have thought that the principle of the Delirium Tremenswatch would play a role in the development of a mass market product primarily intended for the basic market segment. This model was simply and exclusively designed to save space and the watch thus created is still the thinnest in the world. And yet, this model later enabled Swatch to reduce radically the number of components by incorporating many of them into the caseback, exactly like on the world’s thinnest watch. This was indeed one of the main attributes of the new plastic watch comprising just 51 parts.

From 1980 to 1983, Swatch relied on around ten basic patents. In the following years, the watch, and above all, its production processes, were protected by many other patents. Also, no other automatic assembly line to date harbors nearly as many inventions as that used to roll out the Swatch. And there is still no other watch in the world manufactured in this way. For the mechanical SISTEM51 alone, Swatch already holds more than 15 patents. This model is produced on a fully automated assembly chain based on a completely new modern design.

Now let’s just take a step back to the 18th and 19th centuries, the era when Abraham-Louis Breguet represented, in terms of inventiveness, the ultimate figure in the world of watchmaking. He was one of the watchmaking industry’s great inventors, if not its greatest. His most outstanding masterpiece was, and remains, the tourbillon. On June 26th 1801, in other words the 7 Messidor of the Year IX according to the Republican calendar in force at the time, following the French Revolution, Abraham-Louis Breguet obtained ten-year patent rights for a new kind of regulator: the “tourbillon”. It stemmed from observing the adverse impacts of gravity on the rate accuracy of watchmaking mechanisms. The cure was the tourbillon, a construction that suppresses the influence of the force of gravity by enabling the constant rotation of part of the movement. Since then, there have been countless versions of the tourbillon, all based on this principle.

While we owe a large number of inventions to A.-L. Breguet, the company has not remained stuck in the 19th century. By way of example, the brand’s broad range of inventions has been enriched in recent years by the emergence of the 10 hertz oscillator and the use of high-precision silicon parts that greatly improve the reliability and accuracy of timepieces.

Similarly, the other Swatch Group watchmaking brands also benefit from the innovative spirit that drives their research teams. Omega discovered an innovative method for efficiently setting precious stones into the sapphire crystal adorning certain watch casebacks. In the field of anti-magnetism, Omega has developed an additional innovation that led to certification by the Federal Institute of Metrology METAS.

Rado on the other hand has focused on ceramics and created the most diverse range of ceramic colors. This not only represents a true technical feat, but also demonstrates significant aesthetic enrichment.

The Tissot T-Touch has been known worldwide for several years. It is based on patents relating to tactile surfaces and interfaces, as well as to the special dial on the T-Solar.

Nevertheless, Swatch Group’s watchmaking brands do not hold a monopoly on inventions. The production companies also make a substantial contribution in terms of innovation and patent registration. In this instance, I will confine myself to the example of the steel alloy used for the Nivarox-FAR barrel springs, developed very specifically to meet the qualitative needs of Swatch Group, and which enable the heart of every mechanical watch to beat at a rate that is not higher, but is steadier and more regular.

Space would not permit us to list all the new patents here, along with previously existing ones. I feel the same sense of pride in each of these inventions: all of them show that for Swatch Group, innovation and an inventive spirit are not mere words, but rather authentic realities experienced on a day-to- day basis.

The management of all our patents is entrusted to a company affiliated to Swatch Group, ICB Ingénieurs Conseils en Brevets SA. This company with its specialized lawyers handles around 1800 patent families corresponding to some 10 000 national patents worldwide.

Swatch Group also draws on its long tradition of cooperation with state-of-the-art Swiss universities and organizations, such as the ETH Zurich (Swiss Federal Institute of Technology Zurich), the CSEM (Centre Suisse d’Electronique et de Microtechnique), the EMPA (Swiss Federal Laboratories for Materials Science and Technology and the EPFL (Swiss Federal Institute of Technology Lausanne).

Not to mention the 500 apprentices who were trained by Swatch Group companies in 2015 and the approximately 120 who were delighted to celebrate the successful completion of their apprenticeships last year. Here, too, we can say: patently competent!

Swatch Group also needs to patent its solutions, for example, in order to compensate for exchange rate fluctuations. Products that are innovative and of a high standard of quality as well as original marketing campaigns and creative, long-term thinking enables the sustainable implementation of Swatch Group strategies and the securing of its future.

Within the context of the overvaluation of the Swiss franc, everyone is talking about focusing on research and development. Yet the strength of Swiss industry lies in the fact that it also manufactures its products here in Switzerland. The major proportion of a company’s added value is deployed in the place where research, development and production work hand in hand.

And as in the past, the reduction of staff in critical times is simply not on the agenda as it has been with some of our competitors. We are a family and as such, we remain united, also in difficult times – all employees, management and board members. 

And as you have been and remain an important part of this work accomplished hand in hand, we should ideally also be able to patent you, because you are all tüchtig in every possible sense of the word.

And as you, valued shareholders, are again an important part of this work accomplished hand in hand, we should also be able to patent you because you could not be more relevant.

Let us turn to the figures for 2015.

Despite a very difficult environment, we generated net sales of about CHF 8.4 billion.
Net income amounted to about CHF 1.1 billion. There was a strong negative impact of currency losses.
In terms of equity, we remain very good at CHF 11.2 billion, which is an extraordinarily strong equity ratio of 84.7%.
Even though the result is lower than in the previous year, the Board of Directors proposes an unchanged dividend of CHF 7.50 per bearer share and CHF 1.50 per registered share.

Ladies and Gentlemen, Fellow Shareholders, you all participate in the construction of the future of the company. I would like to extend my warm thanks to all of you. I also wish to express my gratitude to the Board of Directors, the Executive Group Management Board and the Extended Group Management Board, as well as all our 36 000 employees for their unwavering commitment during a difficult year in 2015. Finally, I want to thank each and every one of you for the trust you have placed in our company.

Yours, Nayla Hayek
Chair of the Swatch Group Board of Directors

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