The Board of Directors of Safilo Group SpA approves the Results of the First Quarter of 2009
The Board of Directors of Safilo Group SpA approves the Results of the First Quarter of 2009
Main results for the first quarter of 2009:
- Net sales at 287.9 million Euro (326.0 million Euro in the first quarter of 2008)
- EBITDA at 30.2 million Euro, with a margin on sales of 10.5% (46.7 million Euro in the first quarter of 2008)
- Net profit at 1.7 million Euro, with a margin on sales of 0.6% (13.2 million Euro in the first quarter of 2008)
- Net financial position at 617.7 million Euro (570,0 million Euro at the end of 2008)
Padova, 6th May 2009, h 6.00pm – The Board of Directors of Safilo Group S.p.A. today reviewed and approved the results for the first quarter of 2009.
As expected, the Group’s performance during the first quarter of 2009 was influenced by the further decline in consumer spending in all the main international markets. The European countries experienced once again the greatest impact owing to their exposure to the eyewear segments most affected by the current economic slow-down. In the quarter, the reduced purchase frequency of high-end sunglass collections, and the tendency of consumers to favour products with more accessible price points were once more confirmed.
The collections of the house brand Carrera continued to be best sellers in the Italian market, achieving double digit growth also in the first quarter of 2009.
“The first quarter of 2009 was difficult. We have, however, seen encouraging results in the areas of the business on which we are focusing.
Carrera continues to gain market positions, especially in the Italian market, registering particularly significant growth rates considering the difficult and volatile environment.
The renewed focus of the high end collections of the main luxury brands, through a broader product mix able to reach a wider consumer base, has produced positive feedback in the United States and some countries in continental Europe.” stated Roberto Vedovotto, Chief Executive Officer of Safilo.
“Considering the current situation, the improvement during the quarter of the gross margin is particularly significant and is the highest of the last three years. This reflects important actions recently undertaken to consolidate and improve this result, as it is clear that Safilo must be, first and foremost, an efficient industrial structure, conscious of the needs of a continually changing marketplace.
2009 will certainly be a challenging year, but Safilo has the necessary tools to ensure, in the medium-long term, sustained growth through focusing on those areas which have traditionally represented the group’s strengths: product, management of its licensed brands, and distribution.” concluded Roberto Vedovotto.
Consolidated Income Statement
Net sales of Safilo Group, in the first quarter of 2009, reached 287.9 million Euro, down by 11.7% compared to the 326.0 million Euro registered in the first quarter of 2008.
At constant exchange rates, net sales registered a decrease of 14.9%.
In the geographical breakdown, America showed, in the first quarter, a decrease at current exchange rates of 2.8% (-12.2% at constant exchange rates). Sales at department stores and large retail chains were particularly difficult during the period.
The European market closed the first quarter down by 21.1%, penalised by the difficulties experienced in particular in the Spanish, UK, and North European markets. The marked reduction in consumer spending budgets affected mainly the sale of high end sunglass collections, whilst the double digit growth of the house brand Carrera continued also in the first quarter, especially in the Italian market.
Asia’s performance, down by 2.8% at current exchange rates (-11.9% at constant exchange rates), was in line with results registered in the last quarter of 2008, when the marked fall of the Japanese market and the duty-free sales in the region had a considerable impact on the area’s results. The performance of some important emerging markets also witnessed a slow down in the first quarter, and in particular China, where the Group is paying particular attention to the levels of client solvency, even at the expense of further sales opportunities.
Performance by distribution channel. Wholesale turnover reached 262.5 million Euro compared to 301.4 million Euro in the first quarter of 2008, due to the market and product factors previously mentioned. The channel registered a contraction of 12.9% at current exchange rates (-16.5% at constant exchange rates).
The retail business, which counted 324 directly operated stores (268 stores in March 2008), registered a growth of 3.3%.
The growth of the retail channel, linked to the greater number of stores present in the network, was penalised during the quarter by the negative performance of comparable stores, those open for more than a year. The performance of the stores acquired a year ago in Mexico and Australia was affected by the difficult comparison with the first quarter of 2008 during which the Mexican stores Sunglass Island and the Australian stores Just Spectacles registered double digit growth.
Group profitability was characterised by two main factors: the improvement of the Gross Margin and the greater incidence of the selling, administrative and general costs on the turnover.
The good progression of the Gross profit, which reached 60.6% of sales, at 174.6 million Euro, an improvement compared to the 59.2% registered in the first quarter of 2008 (192.9 million Euro), was the result of the new development and industrialisation processes for the collections, and of the lower costs relating to obsolete products, achieved thanks to the policies employed by the Group for collections with a slower inventory turnover. Moreover, the use of social security cushions at the Group’s Italian factories allowed the costs related to the reduction of production outputs, to be contained.
With regards to selling, administrative and general costs, the greater incidence of costs in the first quarter of 2009 was mainly due to the retail channel and the negative performance registered by the directly operated stores open for more than a year.
In the wholesale channel, the incidence of general and administrative expenses, which the Group is attempting to contain through specific cost-cutting actions, was again related to the decline in sales. In absolute amounts, in fact, these costs decreased compared to the first quarter 2008.
Advertising and marketing expenses instead increased, due both to the numerous initiatives undertaken to support the Carrera brand, and to the guaranteed marketing and advertising commitments for licensed brands which are based on the previous year’s sales.
EBITDA was equal to 30.2 million Euro compared to 46.7 million Euro registered in the first quarter of 2008. The gross operating margin reached 10.5% of sales compared to 14.3% during the same period of the previous year.
Operating profit (EBIT) was equal to 19.1 million Euro compared to 36.9 million Euro in the first quarter of 2008. The operating profitability reached 6.6% of sales compared to 11.3% in the same period of the previous year. Depreciation and amortization increased in absolute value and in percentage of sales, due to the larger retail structure.
Net profit was equal to 1.7 million Euro compared to 13.2 million Euro registered in the first quarter of 2008, with a margin on sales of 0.6% from 4.1%.
Net financial costs increased in absolute value and in percentage on sales as a result of the greater net debt registered at the end of the period.
Consolidated Balance Sheet
The Free Cash Flow relating to the first quarter of 2009 registered a cash absorption of 44.7 million Euro, in line with the value registered in the first quarter of 2008.
This result was due to the greater absorption of operating resources owing to the lower net result and an increase of the working capital in the component relating to trade payables.
Cash flow for investment activities in the first quarter of 2009, amounting to 12.7 million Euro, fell compared to the 37.1 million Euro of the first quarter of 2008. The cash flow in the period concerned above all the investments allocated for the renewal and improvement of the production sites, the completion of the new production site in China, and the development of the retail channel.
The Net Financial Position, reached, at the end of March 2009, 617.7 million Euro, increasing compared to the 570.0 million Euro at 31st December 2008 due to the normal cyclical nature of the business.
Outlook for the year
The deterioration and the volatility of the current market demand make it difficult to formulate annual forecasts, and it is for this reason that the management will provide quarterly updates and indications.
A difficult second quarter may already be expected, while some improvements could become evident during the course of the second semester.
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;
- The net financial position 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 Financial Position;
- 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.
At 6.30pm CET today a conference call will be held with the financial community during which the results of the first quarter 2009 will be presented.
It is possible to connect to the call by dialling the following number: +39 02 36269665 or +44 203 0379162 (for journalists: +39 02 36009085) and to listen to the playback by dialling the number +39 02 36008100 or +44 208 1961998 (access code: 6670820#). The conference call can also be followed with the webcast on the site http://investors-en.safilogroup.com/, in the presentations section.
Intermediate quarterly report at 31st March 2009
Please note that before the end of the day, the intermediate quarterly report at 31st March 2009 will be made available to the public at the company’s registered offices and the offices of Borsa Italiana S.p.a.; furthermore, the report will be published on the company’s internet website at the address http://investors-en.safilogroup.com/.