The Board of Directors of Safilo Group approves the company's results at 30th September 2007
GROWTH OF CONSOLIDATED TURNOVER (904 MILLION EURO, +7.1%)
AND NET PROFIT (39 MILLION EURO, +33.1%) IN THE FIRST NINE MONTHS OF 2007 COMPARED TO THE SAME PERIOD OF 2006
- Net sales in the first nine months of 2007 at 903.9 million Euro, +7.1% (+11.0% at constant exchange rates)
- EBITDA in the first nine months of 2007 at 130.2 million Euro, +1.6% (equal to 14.4% of sales)
- Operating Profit in the first nine months of 2007 at 101.6 million Euro, +0.7% (equal to 11.2% of sales)
- Net Profit in the first nine months of 2007 at 38.7 million Euro, +33.1% (equal to 4.3% of sales)
- Net financial position in the first nine months of 2007 equal to 522.9 million Euro (531.8 million Euro at the end of 2006)
- Of little relevance the comparison between the third quarter 2007 and the third quarter of 2006
Padova, 6th November 2007, 12.00pm – The Board of Directors of SAFILO GROUP S.p.A. today reviewed and approved the results at 30th September 2007 which confirm the positive growth of both turnover and net profit in the first nine months of the year.
As widely expected, the comparative performance of the third quarter of 2007 was affected by the unusual level of deliveries which took place in the same period of 2006. The third quarter of 2006 in fact benefited from turnover which was related to orders placed but not shipped due to production capacity constraints during the first half of the year.
This phenomenon therefore renders the comparison of the two quarters of little relevance.
“I believe it is appropriate to focus attention on the results of the first nine months of the year for the important signs they highlight– stated Vittorio Tabacchi, Chairman of Safilo Group – The brands which are of strategic importance have achieved results which are more than positive, and the new licenses, Marc by Marc Jacobs, Hugo Boss, and A/X Armani Exchange, have already obtained excellent performances. Balenciaga, Max&Co and Banana Republic, currently being presented, are being very positively received and we expect the same reception for Jimmy Choo, whose first collection will be on the market at the beginning of 2008.
In the first nine months of the year – continued the Chairman - the Group registered positive performances in all markets, with Asia achieving strong growth rates, closely followed by Europe. Even the American market, considering the unfavourable exchange rate, registered notable results.”
Consolidated Income Statement
The net sales of Safilo Group in the first nine months of the year registered an increase of 7.1%, (+11.0% at constant exchange rates), reaching 903.9 million Euro compared to the 843.6 million of the same period of the previous year.
The comparative analysis of the third quarter data is significantly penalised by the unusual division of deliveries during the course of 2006, weaker in the first half of the year, especially towards European markets, as a result of certain production capacity constraints which were then overcome with the start of the third quarter. For this reason the turnover of the quarter when compared with the same period of the previous year registered a slight reduction to 236.1 million Euro (-0.9%; +3.0% at constant exchange rates).
In the first nine months of the year, the performance of all markets was positive, with Asia registering the highest growth rate, +16.5% (+27.3% at constant exchange rates), followed closely by Europe which grew by 15.2% compared to the same period of the previous year.
At constant exchange rates even America achieved a notable growth of 6.7% (-0.9% at current exchange rates), thanks to the contribution of the new licenses, which in the last quarter more than replaced the brand whose license was not renewed in 2006, and to the further development of the retail channel.
Net sales by product in the first nine months of the year highlighted a balanced growth between prescription frames and sunglasses.
In general terms the first nine months of 2007 have been characterised by the following factors:
- the positive results obtained by the strategic brands and the more than satisfactory contribution of the new licenses;
- the important performance of the house brands which is in line with the Group’s re-launch strategy and is supported by more focused and targeted marketing activities;
- the greater contribution from the retail channel, which ended the first nine months of 2007 with 107 directly managed Solstice stores in the United States and 64 Loop stores in Spain (the chain was purchased at the end of 2006);
- the unfavourable trend of exchange rates (in particular the US Dollar);
- quarterly comparisons not always relevant.
Gross profit in the first nine months of 2007 reached 532.1 million Euro against 508.7 million Euro in the same period of 2006, registering an increase of 4.6% and a margin on sales of 58.9% (60.3% in the first nine months of 2006).
Gross profit in the third quarter 2007 declined by 3.6% compared to the same period last year, reaching 58.7% of sales against 60.4% in the third quarter 2006. The greater proportion of sales deriving from the American market, currently less profitable owing to the persistent devaluation of the dollar, contributed to this result.
Operating profit in the first nine months of 2007 was equal to 101.6 million Euro, largely in line with the value registered for the same period of the previous year, while in the third quarter operating profit fell from 24.4 million Euro to 20.4 million Euro.
The reduction of operating profitability, due above all to the factors described above regarding gross profit, was also affected by the continued development of the retail channel and the consequent increase of sales, general and administrative costs; in contrast such costs were contained in the wholesale business.
Ebitda registered an increase in the first nine months of 1.6% reaching 130.2 million Euro compared to the 128.1 million Euro of the same period of 2006, with a margin on sales of 14.4% (15.2% in the first nine months of 2006).
In the third quarter of 2007, Ebitda reached 29.7 million Euro with an incidence on income of 12.5% compared to 14.0% in the same period of 2006.
Net profit attributable to the Group in the first nine months of 2007 was 38.7 million Euro compared to 29.1 in the first nine months of 2006, with an increase of 33.1% due to the significant reduction of net financial costs which in the first nine months of 2006 were weighed down by the non-recurring costs related to the re-negotiation of the Senior Loan. The tax rate for the period fell to 39.0% compared to 43.0% in the same period of 2006.
Net profit in the third quarter was equal to 5.4 million Euro compared to 7.3 million Euro in the same period of 2006, with an incidence on income which fell to 2.3% from 3.1%. The financial costs of the quarter were largely unvaried despite the general increase in interest rates, while the incidence of fiscal charges remained in line with the previous quarters of the year, at around 40% (47% in the third quarter of 2006).
Consolidated Balance Sheet
Net working capital reported a slight increase compared to the position at 30th September 2006, thereby reducing its incidence on turnover as a result of the following factors:
- The lower incidence of trade receivables due to substantially stable payment conditions and to the greater incidence of retail sales;
- The more controlled growth of stock, following the increase in inventory initiated in the third quarter of 2006 with the aim of providing an improved customer service;
- The slight reduction of trade payables.
Net financial position fell to 522.9 million Euro compared to the 531.8 million Euro at 31st December 2006, highlighting the first results of the activities undertaken to maximize cash generation.
Consolidated Cash Flow
Cash flow from operating activities increased in the first nine months of 2007 to 34.8 million Euro compared to the slight cash absorption registered in the same period of 2006, benefiting above all from the improved working capital management and from the higher net income of the period.
In the first nine months of 2007, Free Cash Flow was equal to 3.7 million Euro compared to an absorption of 22.7 million in the corresponding period of the previous year, and despite the greater investments of the period, necessary above all for the opening of new Solstice stores and the normal replacement of production machinery and equipment.
Outlook for the year
On the basis of the orders collected to date and the assumptions previously provided, the company believes that its full year estimates remain achievable.
Statement by the manager responsible for the preparation of the company’s financial documents
The manager responsible for the preparation of the company’s financial documents, Mr Francesco Tagliapietra, hereby declares, in accordance with paragraph 2 article 154 bis of the Testo Unico della Finanza, that the accounting information contained in the consolidated quarterly report at 30th September 2007 corresponds to the results documented in the books, accounting and other records of the company.
This document contains forward-looking statements, in particular in the Management Expectations section, relating to future events and operating, economic and financial results for Safilo Group. Such forecasts, due to their nature, imply a component of risk and uncertainty due to the fact that they depend on the occurrence of certain future events and developments. The actual results may therefore vary even significantly to those announced in relation to a multitude of factors.
At 3.00pm CET, 9:00am EST today a conference call will be held with the financial community during which the Group’s economic and financial results will be discussed.
It is possible to connect to the call by dialling the following number: +39 02 802 09 11 and to listen to the playback by dialling the number +39 02 806 137 80 (access code: 749#).