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THE BOARD OF DIRECTORS OF SAFILO GROUP S.P.A. APPROVES
Increased Q1 Revenues while business transformation continues as per 2020 Strategic Plan
Padua, April 27, 2015, h. 5.45pm - The Board of Directors of Safilo Group S.p.A. – the fully integrated Italian eyewear creator and worldwide distributor of quality and trust, listed on the Milan Stock Exchange – has today reviewed and approved the results of the first quarter of 2015.
Safilo’s operating performance in the quarter was broadly in line with management expectations, and progress made was in line with the 2020 Strategic Plan.
Net sales grew by 10.6%, benefiting from the currency tailwind recorded in the period, while the increase at constant exchange rates was +0.8%. The Group saw continued strength in North America, further acceleration of growth in Latin America and a continuation of the positive trends in Europe, while Asia declined in the context of the commercial leadership and capability re-set initiated mid last year, and soft trading in China and Hong Kong.
Gross profit improved by 6.8% to Euro 196.6 million. Gross margin contracted in comparison to a strong base of Q1 last year, driven by cost inflation ahead of COGS savings initiative expected to ramp up during the balance of the year, certain phasing effects of spending, and by the impact of a higher inventory obsolescence provision mainly for the to-be discontinued brands, without which gross margin was substantially stable vs. the full year 2014.
Adjusted1 EBITDA declined by -8.2% to Euro 32.6 million and adjusted1 EBITDA margin reduced compared to the same quarter of last year, impacted primarily by the lower gross margin previously explained, while the Group continued to invest into building key capabilities particularly in commercial and product.
The Group’s net result also reflected net negative exchange rate differences and the effects of the fair value valuation of the equity-linked bonds due to the increase in Safilo’s share price in the quarter.
At the end of March 2015, the Group net debt declined to Euro 128.3 million, with the adjusted1 financial leverage at 1.1x.
Luisa Delgado, CEO, commented:
Economic and financial highlights
Key economic and financial performance
In the first quarter of 2015, Group total revenues were Euro 324.3 million, up 10.6% compared to Euro 293.2 million recorded in the same quarter of 2014, benefitting from the Dollar strength. At constant exchange rates, turnover increased by 0.8%.
Q1 2015 Gross profit was Euro 196.6 million, up 6.8% compared to Euro 184.0 million in the same quarter of 2014 with gross margin moving from 62.8% to 60.6%. Gross margin reflected obsolescence provisions in relation to still elevated inventory levels and, as expected, a more subdued start of the year as the Group expects COGS savings and inventory interventions to be more skewed to the second half of the year.
Q1 2015 adjusted1 EBITDA was Euro 32.6 million compared to Euro 35.4 million recorded in the same period of 2014. Adjusted1 EBITDA margin was 10.0% of revenues in Q1 2015, compared to 12.1% in Q1 2014.
Q1 2015 adjusted1 EBIT was Euro 23.3 million compared to Euro 26.8 million registered in Q1 2014. Adjusted1 EBIT margin was 7.2% of revenues in Q1 2015, compared to 9.1% in Q1 2014.
Total financial charges increased to Euro 18.8 million from Euro 2.3 million in Q1 2014 due to the negative impact of exchange rates differences of Euro 10.6 million (positive impact of Euro 1 million in Q1 2014) and the effects of the fair value valuation of the option component embedded in the equity-linked bonds for Euro 4.2 million, driven by an higher average share price in the quarter. In Q1 2015, net financial interests increased to Euro 2.3 million from Euro 1.8 million in Q1 2014.
Q1 2015Group adjusted1net result equaled a profit of Euro 2.3 million compared to thenet result of Euro 16.5 million recorded in Q1 2014.
Key Cash Flow data
In Q1 2015, Free Cash Flow improved to Euro 32.1 million compared to a negative flow of Euro 24.6 million in Q1 2014 and an outflow of Euro 12.4 million at the end of 2014. This result included the first of three compensation payments of Euro 30 million received in January from Kering, net of which Free Cash Flow remained positive. Seasonal absorption from net working capital further improved in the period, down to Euro 17.5 million from Euro 48.9 million in the same quarter of last year. The inventory flow remained broadly in line with the dynamic recorded in the same period of last year, while excluding the impact of currencies the inventory days on hand continued to gradually decrease. As far as trade receivables are concerned, the ratio of days of sales outstanding continued its improving trend, recording a DSO below the first quarter of last year and driving a substantially lower cash absorption. Cash Flow for investing activities was Euro 5.0 million compared to Euro 7.6 million in Q1 2014, driven by product supply upgrades and IT investments.
At the end of March 2015, Group net debt stood at Euro 128.3 million, an improvement of 38.2% compared to Euro 207.5 million at the end of March 2014 and 21.4% compared to Euro 163.3 million at the end of December 2014.
1 Q1 2015 adjusted economic results do not include non-recurring items related to commercial restructuring costs in the EMEA region for Euro 1.2 million.
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. Gerd Graehsler, 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:
Today, at 6.15 pm CEST (5.15pm BST; 12.15pm EDT) a conference call will be held with the financial community during which the results of Q1 2015 will be discussed.
Intermediate quarterly report at 31st March 2015