The Board of Directors of Safilo Group S.p.A. approves the financial results for 2013
THE BOARD OF DIRECTORS OF SAFILO GROUP S.P.A.APPROVES THE FINANCIAL RESULTS FOR 2013
Padua, 5 March 2014, h. 5.50pm – The Board of Directors of Safilo Group S.p.A. has today approved the Company’s consolidated financial statements for the year ended 31 December 20131 and examined the separate financial statements for the year ended 31 December 20131, which will be submitted for approval by shareholders at the Annual General Meeting to be held in single call on 15 April 2014.
The Group ended 2013 with turnover at constant exchange rates very close to the figure for 2012, and grew adjusted EBITDA3margin by 110 bps.
Sales reflected the negative impact of exchange rate movements and the phase-out of certain brands, which actually led to the improvement of margins reflecting an enhanced sales mix now focused on the continuing brand portfolio, and operational improvements in the ordinary activities.
Also the fourth quarter again saw double-digit organic sales growth2, with strong performances across many of the eyewear business’s main markets, channels and brands.
In 2013 Safilo saw a significant reduction in net debt and a substantial improvement in financial leverage, with the ratio of net debt to adjusted EBITDA3 falling to a record low for Safilo of 1.5 times.
The results confirm the emerging financial and operational strength of Safilo Group in a year of business transition and continuing economic fragility in a number of its important markets.
Commenting on the results, Luisa Delgado, the Safilo Group’s Chief Executive Officer, said:
“We are satisfied with our 2013 performance. The priority has been to grow organically so as to replace as much as possible the Armani licenses through broad based organic growth, focus on the profitability of our business, and consolidate the Group's financial strength.
We have achieved these objectives, showing that our portfolio of brands is highly diversified and competitive, our organisation agile and resilient, and our opportunities for further business development many.
Safilo is building the capability to leverage these opportunities systemically going forward.”
The Group’s total turnover amounts to €1,121.5 million for 2013, compared with €1,175.3 million in 2012 (down 1.9% at constant exchange rates and 4.6% at current exchange rates).
Turnover in the wholesale business is down to €1,041.5 million from the €1,094.6 million of 2012 (down 2.2% at constant exchange rates and 4.8% at current exchange rates), whilst Solstice retail business in the USA recorded sales of €80 million (up 2.4% at constant exchange rates and down 0.9% at current exchange rates).
Net sales during the last three months of the year amount to €279.7 million, compared with €312.9 million in the same period of 2012 (down 6.9% at constant exchange rates and 10.6% at current exchange rates), with wholesale turnover totalling €261.5 million, compared with €293.7 million in the same quarter of 2012 (down 7.3% at constant exchange rates and 10.9% at current exchange rates).
At constant exchange rates, Solstice store sales were substantially stable compared with the same quarter of 2012 (€18.2 million, down 0.4% at constant exchange rates and 5.3% at current exchange rates).
Over the year Safilo recorded significant organic growth2, allowing the Company to effectively counter the two dominant themes during the year, one being the negative impact of exchange rates and the other the phase-out of brands in 2012, which had generated a particularly high volume of sales in the fourth quarter of that year.
Organic sales growth2 in the core sunglass and prescription frame segments was again into double digits in the fourth quarter, rising 12.8% and consolidating the trend seen throughout the year at around 12%.
The main drivers of Safilo’s growth in 2013 were again the stronger distribution channels in Germany, France and the UK, the travel retailbusiness and the principal emerging markets, where the value of the brand portfolio was continually in evidence at all levels.
The leading brands in the high-end category, Gucci and Dior, again excelled, whilst brands such as Jimmy Choo and Céline made strong progress across all countries.
In the fashion segment the Tommy Hilfiger, Boss Orange and Marc by Marc Jacobs collections boosted their penetration in the major chains and in new markets, whilst Carrera’s strong performance was driven by development of the prescription frame segment in all the leading countries.
An analysis in terms of geographical area shows that annual turnover in Europe was €470.8 million, slightly up on the €470.6 million of 2012 (up 0.6% at constant exchange rates and stable at current exchange rates), whilst achieving double-digit organic sales growth2.
European turnover in the fourth quarter amounts to €119.1 million, compared with the €128.6 million of 2012 (down 6.6% at constant exchange rates and 7.4% at current exchange rates), with organic sales2 again achieving double-digit growth thanks to Safilo’s commercial strength in markets such as Russia and Turkey, but also due to improvements in countries such as Spain, Portugal and Italy.
Total revenues in the North American market amount to €457.9 million, compared with €488.7 million in 2012 (down 2.5% at constant exchange rates and 6.3% at current exchange rates).
Total revenues for the fourth quarter amount to €108.4 million, compared with the €125.0 million of 2012 (down 7.9% at constant exchange rates and 13.3% at current exchange rates). This reflects the positive performance of organic sales3 in the North American market, accompanied by a slowdown in Latin American countries.
In the Asian market, Safilo ended the year with turnover of €177.5 million, compared with the €198.8 million of 2012 (down 6.4% at constant exchange rates and 10.7% at current exchange rates).
The figure for the fourth quarter more than confirmed the double-digit organic growth3 registered over the year, despite the continuing impact of the phase-out of certain brands in 2012 and the devaluation of the yen. At constant exchange rates, China, Thailand, India and Japan proved to be the most dynamic markets in the area. Turnover for the quarter amounts to €47.1 million, compared with €54.1 million for the same period of 2012 (down 7.2% at constant exchange rates and 12.9% at current exchange rates).
In terms of operating and financial results, 2013 saw an upturn in Safilo’s performance, recovering the ground lost in 2012 and achieving a number of record results in the process.
The Group’s operating performance during the fourth quarter was again marked by a significant improvement in the gross margin, driven by organic sales growth and the positive impact of the brand mix.
Over the year these factors combined with effective and flexible management of labour at the Group’s Italian manufacturing facilities and an ongoing reduction in levels of obsolescence.
Gross profit for 2013 is up to €683.7 million, compared with the €679.7 million of 2012, registering a considerable improvement in the related margin to 61%, as opposed to the 57.8% of the previous year.
Gross profit for the fourth quarter amounts to €166.8 million, compared with the €170.6 million of the same period of 2012. This has resulted in a 510 basis-point improvement in the gross profit margin, up to 59.6% from the 54.5% of the fourth quarter of 2012.
The Group’s operating result for 2013 was affected by non-recurring expenses of €10.1 million, including €6.2 million due to the change in senior management in October 2013 and €3.9 million for a number of restructuring initiatives in Europe.
Group net profit also reflects provisioning for tax liabilities resulting from disputes arising in Italy in relation to the years of assessment from 2007 to 2011, totalling €14 million.
After stripping out these items, adjusted EBITDA3 for the year amounts to €121.8 million, up 5.8% on the €115.1 million of 2012. The adjusted EBITDA margin3 has, on the other hand, improved by 110 basis points to 10.9%, compared with 9.8% for 2012.
Adjusted EBITDA3 for the fourth quarter amounts to €33.1 million, up 13.6% in absolute terms on the €29.2 million of the same period of 2012 and an improvement of 260 basis points in terms of the adjusted EBITDA margin3, up to 11.9% from the 9.3% of the fourth quarter of 2012.
Adjusted EBIT3 for 2013 amounts to €84.8 million, up 14.8% on the €73.9 million of 2012. The adjusted EBIT margin3 is up 130 basis points to 7.6% from the 6.3% of 2012.
Adjusted EBIT3 for the fourth quarter shows a significant improvement, having risen to €23.3 million from the €17.0 million of the same period of 2012. The adjusted EBIT margin3 is up 290 basis points to 8.3% from the 5.4% of the fourth quarter of 2012.
Net financial expenses for the full year are significantly down, amounting to €22.6 million compared with the €29.3 million of 2012. The Group’s net interest expense almost halved in 2013, falling from €19.1 million to €11.3 million following the redemption of High Yield Bond in May 2013.
After an adjusted tax rate3 for the year of 34.5%, Safilo reports adjusted Group net profit2 of €39.0 million, up 50.7% on the €25.9 million of the previous year. Adjusted net profit3 for the fourth quarter has more than doubled with respect to the same period of 2012, rising to €11.7 million from €5.0 million for the same period of the previous year.
The Group continued to generate cash from operating activities in 2013, with a cash inflow of €68.6 million after non-recurring expenses of approximately €7 million and an increase in non-cash items.
Cash used in investing activities remained stable at around €40 million (€41 million in 2012 before cash used for the acquisition of Polaroid). Cash used in the fourth quarter included a portion of the amount invested in the development and implementation of SAP software in Italy.
Safilo’s net debt at the end of 2013 amounts to €182.5 million, substantially in line with the figure for the end of September (€180.7 million) and down approximately €33 million on 31 December 2012 (€215.3 million).
This has enabled Safilo to reduce its adjusted leverage ratio3 to 1.5 times, a new record low after the fall to 1.9 times seen in 2012.
In view of the above results and the current business environment, the Board of Directors have decided not to propose payment of a dividend to the Annual General Meeting.
Following a two-year transition period, during which the Group has succeeded in effectively and resolutely redefining the scope of our business, 2014 will be a year of continuity and further expansion of the brand portfolio, recently enriched by the launch of the Fendi brand in our principal international markets.
In the eightieth year since the Company’s foundation, Safilo reiterates its commitment to strengthening and injecting renewed vitality into our main areas of business, so as to guarantee the Group lasting and profitable growth, starting with our Safilo brands, the main emerging markets and the distribution channels with the greatest growth potential.
These are the principal objectives underlying Safilo’s strategy in 2014, together with the development of programmes designed to improve our business processes and the related information systems.
The Board of Directors of Safilo Group S.p.A. (the “Company”) met today to define, on the basis of the proposal of the Remuneration and Nomination Committee, the general guidelines of the Stock Option Plan 2014-2016 (the “Plan”), which provides for the granting of options allowing newly issued ordinary shares of the Company to be purchased.
The Plan is reserved to a selected group of directors and/or senior executives of the Company and/or its subsidiaries identified by the Board of Directors, on the basis of the proposal of the Remuneration and Nomination Committee, amongst those individuals who hold a key role in achieving the strategic objectives of the Company (the “Beneficiaries”).
The Plan is aimed at supporting the improvement of the Company’s long-term performance and the creation of shareholder value through the retention of individuals deemed key to the Group’s development and with the aim of aligning the objectives of the Beneficiaries with those of the Company’s shareholders.
In accordance with the Plan, a maximum of 1,500,000 options will be issued and granted to the Beneficiaries, subject to the achievement of predetermined performance targets, and will give the Beneficiaries the right to subscribe one ordinary share of the Company for every option assigned.
The disclosure document relating to the Plan, including the description of the procedures and clauses for the implementation of the Plan, as well as the procedures and criteria for determining the stock option prices, will be published within the deadlines set forth by applicable law before the Company’s Shareholders’ Meeting called today by the Board of Directors on April 15, 2014, to approve the abovementioned Plan.
Decisions concerning the implementation of the Plan will be made public as per the provision of Article 84-bis, para 5, letter a) of the Issuers’ Regulations.
For the purposes of implementing the Plan, the abovementioned Shareholders’ Meeting has been also called on an Extraordinary session to approve the proposal of a paid and separable capital increase, with exclusion of the option rights according to Article 2441, paragraph 4, second sentence, of the Civil code, by means of the issuance of a maximum of 1,500,000 shares, par value 5 euro each, for a maximum nominal value equal to Euro 7,500,000.
1 The consolidated and separate financial statements are currently being audited, a process that has yet to be completed.
2 Excluding the sales of the Armani brands not renewed at the end of 2012 and the Polaroid business recorded in the first quarter of 2013. The organic performance in the wholesale core sunglass and prescription frame products is expressed at constant exchange rates.
3 Adjusted 2013 results do not include non-recurring costs recorded in the second quarter of 2013, amounting to €7.4 million, and in the fourth quarter, amounting to €16.7 million, for a total amount of €24.1 million (€23.4 million net of tax effect). Of these, €10.1 million are related to the CEO succession plan occurred in October 2013 and to some restructuring expenses in the European market while €14.0 million are related to a provision for fiscal risks related to litigations opened in Italy for years 2007-2011.
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. Vincenzo Giannelli, 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;
- The 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;
- The 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 debt;
- The 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 6.30pm CEST (5.30pm GMT; 12.30pm US EST) a conference call will be held with the financial community during which the results of the full year 2013 will be discussed.
It is possible to follow the conference call by calling +39 06 87500874, +44 203 4271912 or +1 646 2543367 (for journalists +39 06 99749000) and entering the access code 9288105.
A recording of the conference call will be available until March 7, 2014 on +39 06 45217196, +44 203 4270598 or +1 347 3669565 (access code: 1220893). The conference call may be followed via webcast at www.safilo.com/it/investors.html. The presentation is available and may be downloaded from the Company’s website.
Notice of the call of the Ordinary Shareholders'Meeting
In the coming days, the notice of the call of the Shareholders' Meeting will be available on the website www.safilo.com/it/investors.html, where the Reports from the Directors to the Shareholders' Meeting on the proposals regarding the items on the agenda, will also be made available.