The Board of Directors of Safilo Group S.P.A. Approves The Financial Results For 2011
THE BOARD OF DIRECTORS OF SAFILO GROUP S.P.A. APPROVES
THE FINANCIAL RESULTS FOR 2011
Key economic and financial highlights (in millions of euro):
|Net Sales||· 1,101.9 in FY 2011: +6.0% at constant perimeter1 and exchange rates
|EBITDA||· 122.6 in FY 2011 (11.1% margin): +13.7%
|EBIT||· 86.2 in FY 2011 (7.8% margin): +27.1%
|Net Profit||· 27.9 in FY 2011 (2.5% margin) compared to 0.7 in FY 2010
|Net Debt||· 238.3 at the end of December 2011 from 239.4 at the end of September 2011 and 256.2 at the end of December 2010
· Net debt / EBITDA at 1.9x
Padua, March 8, 2012, h.5.45pm – The Board of Directors of Safilo Group S.p.A. today approved the consolidated financial statements for 20112. The Board of Directors also reviewed the financial statements at December 31, 20112, which will be submitted for approval to the Shareholders’ Meeting called for April 27, 2012 in first call or for May 04, 2012 in second call.
In the fourth quarter of 2011, financial results remained healthy for Safilo, with trends substantially in line with the third quarter of the year. Top line growth was again driven by the strong performance of the Group’s licensed brand and own brand portfolio in the main fast-growing markets in Asia and Latin America as well as by the resilience of the US market.
In the quarter, the net result was positive and benefited from the good performance of the operating result.
Results in full year 2011 proved to be very solid for Safilo, underlining year-on-year improvements at all economic and financial levels. The Group’s 2011 revenues increased by 6.0% at constant perimeter1 and exchange rates, EBITDA and EBIT improved double-digit, driving the net result to a profit of Euro 27.9 million.
The Group finished the year with a strong balance sheet, with the financial leverage of net debt to EBITDA at 1.9x.
Roberto Vedovotto, Chief Executive Officer of the Safilo Group, commented:
“I would describe 2011 as a year of achievements and important changes for Safilo Group.
In 2011, we built up from the foundations laid down in 2010, recording meaningful economic and financial improvements.
Our results were positive throughout the entire year, with Asia and America remaining on track as growth engines while Europe was more challenging due to the economic and political turmoil which impacted the region starting from the second half of 2011.
In the year, the sales of our top licensed brands, Gucci and Dior, achieved important results in emerging markets and in mature countries, proving the brand success and strength of the product and distribution policies of the Group.
We were also very satisfied with the results recorded by the licenses of the Hugo Boss Group and Marc Jacobs as much as with the strong international expansion of Tommy Hilfiger.
During the year, we focused our efforts in line with the goal to become the leading pure wholesale player in the global eyewear industry and we worked out our strategies and actions towards this ambitious goal.
We enhanced our organizational and managerial structures to ensure a fast and efficient execution of our plans in all key business areas.
We implemented the rationalization strategy of our portfolio of licensed brands, focusing resources and know-how only on those brands which are relevant in the eyewear sector or have important growth opportunities going forward.
With the clear objective of achieving greater profitability through efficiency programs, we did not renew a number of small brands.
On the opposite side, we continued to scout for better opportunities, signing a new multi-year licensing agreement for the production and worldwide distribution of Céline eyewear, a prestigious brand in the high-end segment which is enjoying a worldwide strong brand recognition.
We worked hard at executing our strategy of building an important portfolio of Safilo own brands, with the goal to increase our market share through global brands which also cover diffusion, specialist and value for money segments.
We kept pushing on the expansion of our brand Carrera, which in 2011 reached above expectation results in the US and Latin American markets.
The announced acquisition of the Polaroid Eyewear business, in November 2011, represented a seal to our strategy on Safilo own brands. Polaroid is a high potential iconic brand that embodies the technological spirit of the inventor of the polarized sunglasses.
After its completion, expected by the end of the first quarter of 2012, we will have a strong brand to work with in many new markets and in a business segment where our presence is today not significant, thus enlarging the total reach of our Safilo’s Brands Division.”
Key Economic data
In the fourth quarter of 2011, net sales equaled Euro 268.4 million, up 2.5% compared to the same period of 2010. The performance was influenced by the revaluation of the USD against the Euro occurred during the last quarter of 2011 and by the sale of the retail chain in Mexico which took place at the end of 2010.
At constant perimeter1 and exchange rates, the Group’s sales rose by 3.8%.
For full year 2011, net sales totaled Euro 1,101.9 million, reporting a year-on-year increase of 2.0% or 6.0% at constant perimeter1 and exchange rates.
In the last quarter of the year, the wholesale business reported revenues of Euro 250.9 million, up 3.3% at constant exchange rates compared to Euro 241.8 million in the fourth quarter of 2010 (+3.8% at current exchange rates).
Full year 2011 wholesale revenues reached Euro 1,029.3 million, up 5.5% at constant exchange rates compared to Euro 992.9 million in full year 2010 (+3.7% at current exchange rates).
Sales of the retail business, at the end of December 2011 in 151 Solstice stores in the US, accounted for Euro 17.5 million in the fourth quarter and Euro 72.6 million in full year 2011, declining respectively by 12.3% and 16.6% due to the different perimeter1.
The like for like performance of Solstice stores remained indeed positive, up 7.5% and 7.2% respectively in the fourth quarter and full year 2011, thanks to the Group’s strategy to rationalize the network maintaining only the most efficient and profitable locations.
From a geographical standpoint, in the fourth quarter of 2011, revenues in the American market were Euro 110.9 million compared to Euro 109.3 million in the same period of 2010, highlighting a resilient mid-single digit growth rate of 5.2% at constant perimeter1 and exchange rates.
The Group’s performance in the region reflected the ongoing expansion of the business in the Latin-American markets, the confirmed leadership in the main independent opticians channel in North America and the good holiday season for the Solstice stores.
The house brand Carrera posted another excellent quarter of growth in the region, becoming Safilo’s second most relevant brand.
American sales in full year 2011 confirmed their positive momentum, reaching Euro 454.5 million, up 7.7% at constant perimeter1 and exchange rates (-1.3% at current exchange rates compared to Euro 460.5 million in full year 2010).
Revenue growth in the Asian markets further accelerated in the fourth quarter of 2011, surging to Euro 50.2 million compared to Euro 40.7 million in the same period of 2010 (+21.6% at constant exchange rates, +23.4% at current exchange rates). Momentum was broad-based across all Safilo’s most important licensed, house brands and product categories.
In the fourth quarter of 2011, the main countries of the region, China, South Korea, Hong Kong and the travel retail business remained Safilo’s principal growth engines and the main contributors to the Group’s full year 2011 performance.
Asian revenues totaled Euro 185.3 million in 2011, delivering a growth of 17.0% at constant currencies (+14.7% at current exchange rates) compared to Euro 161.6 million in full year 2010.
The weight of the area on the total business increased to 16.8% in full year 2011 from 15.0% in 2010, with China, including Hong Kong, already representing the fourth most important market for Safilo.
The European business continued to be challenging also in the last quarter of the year, with revenues which contracted by 4.0% in the period to Euro 101.9 million compared to Euro 106.2 million in the same period of 2010. The main areas of weakness were still represented by the Southern European countries, mitigated by the satisfactory performance of France, Germany and UK.
Safilo’s products advanced within key accounts, an area of business where Safilo Group is strengthening its activities and organization.
2011 was important for Safilo also in terms of its further progression in the Russian market where the Group’s collections are meeting with increasing success.
In full year 2011, sales in Europe equaled Euro 445.1 million, increasing by 1.1% compared to Euro 440.4 million in full year 2010 (+0.8% at constant exchange rates).
Gross profit amounted to Euro 154.7 million in the fourth quarter of 2011, up 5.1% compared to Euro 147.2 million in the same period of 2010. The margin equaled in the period 57.6% of sales, registering an improvement of 140 basis points compared to the margin of 56.2% recorded in the fourth quarter of 2010.
In full year 2011, gross profit reached Euro 652.3 million, increasing by 3.6% over full year 2010, with the margin standing at 59.2% of sales compared to 58.3% in 2010.
This improvement is also the result of the more efficient commercial policies adopted by the Group as well as of the better management of the different distribution channels.
Operating profit (EBIT) was equal to Euro 16.2 million in the fourth quarter of 2011, up 4.7% compared to Euro 15.4 million registered in the fourth quarter of 2010. Operating profitability equaled 6.0% of sales, in line with the same quarter of 2010.
In full year 2011, the operating profit (EBIT) totaled Euro 86.2 million, growing by 27.1% compared to Euro 67.8 million registered in full year 2010. The operating profitability increased to 7.8% of sales compared to 6.3% in full year 2010.
During the year, Safilo continued to invest in its core wholesale business by means of important projects, all aimed at enhancing and strengthening its key, strategic business areas. SG&A expenses, whose incidence on sales remained, in the quarter, in line with the Group’s nine-month average, were also influenced by the activities undertaken to accomplish the acquisition of the Polaroid Eyewear business.
EBITDA reached Euro 25.0 million in the fourth quarter of 2011, with a margin on sales equal to 9.3%, slightly below the same quarter of 2010 (Euro 25.4 million, 9.7% of sale).
EBITDA was up 13.7% in full year 2011, totaling Euro 122.6 million compared to Euro 107.8 million in full year 2010. Profitability improved by 110 basis points in the year, standing at 11.1% of sales compared to 10.0% in 2010.
In the fourth quarter of 2011, Safilo reported a positive net result of Euro 1.3 million compared to the Group’s net profit of Euro 4.4 million in the same quarter of 2010. Below the operating line, as occurred during the third quarter, the result of the period was influenced by the negative impact of exchange rate differences related to balance sheet items, following the further devaluation of the Euro spot rate against the USD at the end of December.
In full year 2011, the Group’s net profit reached Euro 27.9 million compared to Euro 0.7 million profit recorded in full year 2010.
Key Cash Flow data
Free Cash Flow was positive for Euro 24.7 million at the end of full year 2011, compared to the cash generation of Euro 74.3 million in 2010. In the fourth quarter of 2011, the free cash flow remained positive for Euro 4.4 million compared to the cash generation of Euro 9.8 million in the fourth quarter of 2010.
In full year 2011, total investments reached Euro 31.2 million mainly dedicated to the maintenance capex related to the production facilities in Italy and abroad.
Net debt at the end of December 2011 amounted to Euro 238.3 million, in line with Euro 239.4 million registered at the end of September 2011 and lower than Euro 256.2 million at the end of December 2010. The financial leverage (Net debt / EBITDA) was thus equal to 1.9x.
The year 2012 should see an overall positive business environment in the eyewear industry despite the continuous weakness of some important European markets, thanks to the predicted trends in North America and especially in main emerging countries where Safilo’s competitive position is very strong after the extraordinary results achieved in 2011.
Within this context, Safilo expects revenues and profitability to be influenced by the phase-out of the Armani Group licenses, on which the Group will have more limited business opportunities in consideration of the already announced termination that will occur at the end of December 2012.
It is however foreseen that the development projects undertaken on all strategic licensed and in particular Safilo’s brands will partially counterbalance the negative impacts of the phase-out process.
Safilo informs that the completion of the acquisition of the Polaroid Eyewear business is expected to occur by the end of the first quarter of 2012.
As indicated in the press release dated December 21, 2011, the capital increase, against payment, reserved for subscription to its main shareholder, Multibrands Italy B.V., controlled by HAL Holding N.V., will occur in the week following such event.
In consideration of the already announced termination of the license agreement with the Armani Group, expiring at the end of December 2012, and the acquisition of the Polaroid Eyewear business, the Board of Directors deemed it appropriate not to propose to the Shareholders’ Meeting the distribution of any dividend.
As required by Article 84-bis of the Regulations for Issuers, approved with Consob Resolution no. 11971 on May 14, 1999 and subsequent amendments, notice is hereby given that, with reference to the Stock Option Plan 2010 – 2013, the Board of Directors today awarded the Options of the Third Tranche, after having identified, on the basis of the proposal of the Remuneration Committee, the eligible beneficiaries. All information are indicated in the table in Appendix B.
The features of the instruments awarded are the same as those described in the press release issued on October 4, 2010 and in the documents related to the Plan, available on the web site of the company http://www.safilo.com/en/investors.html.
1 Excluding the sold retail chain in Mexico, which had recorded sales of Euro 4.6 million in the fourth quarter of 2010 and Euro 20.3 million in the full year 2010.
2 The consolidated Financial Statements and Financial Statements are currently subject to audit activities as yet not concluded.
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 this press release corresponds to the accounting results, registers and records.
This document contains forward-looking statements, 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
Alternative Performance Indicators
The definitions of the “Alternative Performance Indicators”, not foreseen by the IFRS-EU accounting principles and used in this press release to allow for an improved evaluation of the trend of economic-financial management of the Group, are provided below:
- Ebitda (gross operating profit) is calculated by Safilo by adding to the Operating profit, depreciation and amortization;
- Net debt is for Safilo the sum of bank borrowings and short, medium and long-term loans, net of cash in hand and at bank;
- Net capital employed for Safilo is the sum of current assets and non-current assets net of current liabilities and non current liabilities, with the exception of the items previously considered in the Net Financial Position;
- Free Cash Flow for Safilo is the sum of the cash flow from/(for) operating activities and the cash flow from /(for) investing activities.
Today, at 6.00 pm CET (5.00 pm GMT; 12.00 am EST) a conference call will be held with the financial community during which the results of the fourth quarter and full year 2011 will be discussed.
It is possible to participate to the call by dialing the following number: +39 02 69633532 or +44 207 1366283 (for journalists: +39 02 36269650) and quoting the following confirmation code: 3436144.
The playback of the conference call will be available from March 8 to March 10, 2012 by dialing the number +39 02 30413127 o +44 207 1111244 (access code: 3436144#). The conference call can also be followed via webcast on the site www.safilo.com/en/investors.html. The presentation is available and downloaded from the company website.
Notice of the call of the Ordinary Shareholders’Meeting
In the coming days, the notice of the call of the Ordinary Shareholders’ Meeting will be available on the website www.safilo.com/en/investors.html, where the Report from the Directors to the Shareholders’ Meeting on the proposals regarding the items on the agenda, will also be made available.