The Board of Directors of Safilo Group S.p.A. approves the results of the first half of 2012
THE BOARD OF DIRECTORS OF SAFILO GROUP S.P.A. APPROVES THE RESULTS OF THE FIRST HALF OF 2012
Padua, August 2, 2012, h.5.30pm – The Board of Directors of Safilo Group S.p.A. today reviewed and approved the results of the second quarter and first half of 2012.
In the first six months of the year, Safilo achieved net sales of Euro 613.3 million, compared to Euro 603.3 million in the same period of 2011. The period benefitted from the consolidation, starting from the second quarter of 2012, of the newly acquired Polaroid Eyewear business, a world leader in optics and polarized lens technology and a key element towards Safilo’s development strategy in the specialist and value-for-money segments.
The semester was also influenced by the appreciation of the US dollar and the effect of the Armani phase out.
In economic terms, in the first half of 2012 the Group recorded an operating profit of Euro 51.2 million and a net profit equal to Euro 21.5 million.
Through effective working capital management, the financial leverage remained close to the level reached at the end of 2011.
In the second quarter of 2012, Group net sales recorded an increase of 7.3%.
The underlying organic sales performance, when excluding the effect of the acquisition of Polaroid, the FX impact, the impact of the Armani phase out and discontinuation of Balenciaga, Nine West and Valentino, showed a positive growth of 6.1%.
Roberto Vedovotto, Chief Executive Officer of Safilo Group, commented:
“The second quarter of 2012 represented for Safilo a further step forward.
The results achieved are in line with our expectations and consistent with our plan.
Safilo improved operating performance, compared to the first quarter of the year. The net financial position is at the lowest level in the last ten years, notwithstanding the acquisition of Polaroid Eyewear.
As far as our industrial strategy is concerned, we have reached an agreement with Unions, which will allow the Group to continue to operate in a competitive market with an efficient, lean and flexible manufacturing footprint.
During the period, we confirmed our strategy of consolidation and enhancement of the brands portfolio, with the acquisition of Polaroid Eyewear and the long term renewal of the partnership with Hugo Boss Group, one of Safilo’s important and prestigious licensed agreements.
These steps represent further evidence that we remain committed to our vision of selective portfolio approach and management, on the back of the actions already put in place in this direction over the years.”
Key economic and financial performance
The sales for the period, which starting from the second quarter of 2012 include the newly acquired Polaroid Eyewear business, were also characterized by the positive impact of the USD revaluation and the negative impact of the progressive phase-out of the Armani Group licenses.
In the second quarter of 2012, Group net sales reached Euro 324.6 million, growing 7.3% compared to Euro 302.6 million recorded in the second quarter of 2011 (-1.8% at constant exchange rates and perimeter1). In the period, revenues for the wholesale business increased by 6.7%, reaching Euro 301.2 million compared to Euro 282.3 million in the second quarter of 2011 (-2.2% at constant exchange rates and perimeter1).
The retail business, represented by the Solstice stores in the United States, recorded sales of Euro 23.4 million compared to Euro 20.3 million in the same quarter of 2011.
Retail sales grew by 15.3% at current currency and 3.3% at constant currency thanks to the 6.3% like for like store performance. At the end of June, the network was made up by 137 stores (143 at the end of March 2012 and 158 at the end of June 2011).
The organic performance of sales, calculated on the portfolio of continuing brands, was again positive, recording an acceleration compared to the trend of the first quarter of the year.
Within the portfolio of licensed brands, the high-end propositions of Gucci and Dior, together with the collections of the Hugo Boss Group brands, Marc Jacobs licenses and Tommy Hilfiger had good results in the quarter.
On the Safilo brands front, the second quarter saw the promising debut of “Carrera 6000”, a new vintage model characterized by the wavy temples and entirely made in Optyl, a Safilo registered trademark material.
The first half of 2012 ended with net sales of Euro 613.3 million, up 1.7% compared to Euro 603.3 million registered in the same period of 2011 (-4.1% at constant exchange rates and perimeter1).
In the first six months of the year, the wholesale business recorded a turnover of Euro 572.7 million, up 1.0% compared to Euro 566.8 million in the first half of 2011 (-4.5% at constant exchange rates and perimeter1).
The retail channel reached sales of Euro 40.6 million, up 11.2% at current exchange rates and 2.8% at constant exchange rates.
From a geographical standpoint, the second quarter of 2012 saw the American market gaining momentum, achieving significant growth in the prescription frames business, characterized by the Group’s strong presence in the US independent optician stores, as well as in the sunglass business, as testified by the 6.3% like for like sales growth posted by Solstice stores.
In the quarter, sales in the area reached Euro 130.6 million, up 14.3% compared to Euro 114.3 million recorded in the second quarter of 2011 (+4.0% at constant exchange rates and perimeter1).
In the period, the turnover of the brands exclusively developed for the American market showed good progress, while in the high-end segment, the Hugo Boss Group brands, Gucci, Jimmy Choo and Céline were performing well. Business in Latin America was led by the strong development of the Carrera brand.
In the first half of 2012, sales in the American market reached Euro 248.0 million compared to Euro 233.0 in the first half of 2011 (+6.4% at current exchange rates; -0.6% at constant exchange rates and perimeter1).
In Asia, emerging markets were characterized by progress of the high-end collections. In addition, products in the fashion and diffusion segments, led by Tommy Hilfiger, Boss Orange and Carrera, increased sales.
On the other end, sales in Japan registered a significant contraction.
In the second quarter of 2012, sales in Asia equaled Euro 57.2 million compared to Euro 52.6 million in the corresponding quarter of 2011 (+8.7% at current exchange rates; -2.2% at constant exchange rates and perimeter1).
In the first half of 2012, revenues in the area reached Euro 106.1 million, up 6.2% compared to Euro 99.9 million in the first half of 2011 (-1.8% at constant exchange rates and perimeter1).
Europe remained the most difficult business region, characterized by significant differences in the performance by country and distribution channel.
In the second quarter of 2012, Continental Europe markets again highlighted a positive organic performance which found further confirmation in countries like Germany, France and in particular in the key account channels.
As far as Southern Europe markets were concerned, sales in the three main countries of the area, Italy, Spain and Portugal, were steadier compared to the previous quarters.
In the second quarter of 2012, European sales, main beneficiaries of the consolidation of the Polaroid business, equaled Euro 132.5 million compared to Euro 131.7 million in the second quarter of 2011 (+0.6%; -6.6% at constant exchange rates and perimeter1).
The first half of 2012 ended in Europe with revenues of Euro 250.9 million compared to Euro 261.8 million registered in the same period of 2011 (-4.2%; -7.8% at constant exchange rates and perimeter1).
In terms of economic performance, in the second quarter of 2012, the gross profit amounted to Euro 191.1 million, up 5.5% compared to Euro 181.3 million registered in the second quarter of 2011. The gross margin was equal to 58.9% of sales (59.9% in the second quarter of 2011), influenced by the decline of production volumes in the Italian plants due to the Armani progressive phase-out.
In the first half of 2012, the gross profit stood at Euro 365.3 million, in line with Euro 364.3 million registered in the first half of 2011.
The Group operating profit (EBIT) amounted to Euro 28.1 million in the second quarter of 2012, contracting by 7.8% compared to Euro 30.5 million in the second quarter of 2011.
In the first half of 2012, the operating profit stood at Euro 51.2 million, down 17.3% compared to Euro 61.9 million in the first half of 2011.
The operating profitability of the quarter and of the semester were equal to 8.7% and 8.3% respectively.
EBITDA, in the second quarter of 2012, reached Euro 38.4 million compared to Euro 39.5 million in the same period of 2011. The EBITDA margin was equal to 11.8% of sales (13.1% in the second quarter of 2011).
The first six months of the year closed with an EBITDA of Euro 70.7 million, corresponding to 11.5% of the period sales (Euro 80.2 million or 13.3% of sales in the first half of 2011).
Safilo closed the second quarter of 2012 with a Group net result of Euro 9.6 million and a net margin of 3.0% (Euro 12.9 million or 4.3% of sales in the second quarter of 2011).
In the period, net financial expenses declined by 26% compared to the same quarter of 2011, mainly thanks to the early partial reception of the Euro 60 million High YieldBond undertaken by the Group in June 2011. In the quarter, the strong USD appreciation was instead responsible for the negative impact of exchange rate differences.
In the first half of 2012, the Group net profit was equal to Euro 21.5 million or 3.5% of sales, compared to Euro 31.3 million in the first half of 2011.
Key Cash Flow data
In the first half of 2012, the Free Cash Flow highlighted the solid cash generation from operating activities, which benefitted from the net profit of the period and the positive flows from working capital, particularly evident in the second quarter of the year.
In the quarter, the cash flow for investing activities increased due to the acquisition of the Polaroid Eyewear business, for a net consideration of Euro 58.4 million. It is to be remembered that the transaction was funded for Euro 44.3 million by Multibrands Italy B.V., controlled by HAL Holding N.V., via a reserved capital increase.
In terms of investments, the first half of 2012 saw the Group also increasing from 51.0% to 90.0% the shareholding in the Chinese subsidiary, one of Safilo’s most strategic regions.
Net debt at the end of June 2012 was down to Euro 231.0 million compared to Euro 238.3 million at the end of December 2011 and Euro 240.3 million at the end of June 2011.
As expected, at the end of June the Group repaid around Euro 80 million of Senior debt, related to Facility A1 - Tranche 1, Facility A2 and A3. This reimbursement was mainly funded through available cash.
The financial leverage (Net debt/EBITDA LTM) was 2.0x, compared to 1.9x at the end of December 2011 and 1.95x at the end of June 2011.
1 In the second quarter of 2012, the business perimeter of Safilo Group also includes Polaroid Eyewear, consolidated starting from April 2012.
Relevant subsequent events
On July 10, Hugo Boss Group and Safilo Group announced the renewal of their license agreement with a term until 2020 for the design, production and worldwide distribution of BOSS Black, BOSS Orange and HUGO frames and sunglass collections.
On July 23, Safilo Group informed that, together with the Unions, it had signed, at the offices of the Ministry of Employment and Social Security in Rome, the solidarity agreement in order to best manage the industrial impacts due to the non-renewal of the Armani licenses.
The agreement fully reproduces the contents of the preliminary agreement signed and announced on June 15, 2012, and further illustrates the related operational details, with specific regards to work organization and the way in which the reduction of working hours and shifts will be implemented.
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 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 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.
Today, at 6.00 pm CEST (5.00 pm BST; 12.00 am US EDT) a conference call will be held with the financial community during which the results of the second quarter and first half of 2012 will be discussed.
It is possible to participate to the call by dialing the following number: +39 02 69633532 or +44 203 3645381 (for journalists: +39 02 69633533) and quoting the following confirmation code: 3774448.
The playback of the conference call will be available from August 2 to August 4, 2012 by dialing the number +39 02 30413127 o +44 203 4270598 (access code: 3774448#). The conference call can also be followed with the webcast on the site www.safilo.com/en/investors.html. The presentation is available and downloadable from the company website.
Financial statement as of June 30, 2012
Please note that before the end of the day, the half-yearly financial report as of June 30, 2012 - containing the half-year condensed financial statements, interim directors' report and the declaration pursuant to article 154-bis subsection 5 of ‘T.U.F.’ (Testo Unico sulla Finanza or Italy's Financial Markets Consolidation Act) – will be made available to the public at the company’s registered offices and will be published on the company’s internet website, at the address http://www.safilo.com/it/investors.html. Furthermore, the Auditors’ report and any eventual observations made by the Board of Statutory Auditors will be made available to the public in the same way, as soon as they are available and in accordance with the law.