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THE BOARD OF DIRECTORS OF SAFILO GROUP S.P.A. APPROVES
Positive sales momentum in core markets, partly offset by expected softness in Asia
Strong Free Cash Flow generation and record low Net Debt
Good progress on 2020 Initiatives – Investing for the Future
Padua, August 4, 2015, h. 6.05pm - The Board of Directors of Safilo Group S.p.A. – the fully integrated Italian eyewear creator, listed on the Milan Stock Exchange – has today reviewed and approved the results of the second quarter and first half of 2015.
Net sales for the first six months of 2015 grew by 11.3% on a reported basis and by 1.0% at constant currencies, with the business recording an improvement in the second quarter, up 12.0% (+1.2% at constant currencies).
In the first half of 2015, gross profit grew by 6.9%, having increased by 7% in the second quarter.
At the operating level, adjusted1 EBITDA was down 12.6% in the first half and 16.9% in the second quarter, with profitability reflecting the margin performance recorded at the gross profit level.
Safilo’s adjusted1 Group’s net result in the first six months of 2015 declined by 68.5%, impacted by financial charges behind the net negative exchange rate differences recorded in the first quarter and the effects of the fair value valuation of the equity-linked bonds. In the second quarter, the adjusted1 Group’s net result mainly reflected the operating dynamics described above.
In the period, Safilo generated Free Cash Flow of Euro 51.6 million helped on the one hand by the first of three compensation payments of Euro 30 million received in January from Kering, and on the other hand by the ongoing improvement of net working capital management driven by a reduction in inventory days on hand and accounts receivable DSO (days of sales outstanding). At the end of June 2015, Group net debt further declined to Euro 110.1 million, improving the adjusted1 financial leverage at 1.0x.
Luisa Delgado, CEO, commented:
The lower gross margin result achieved in the first half, impacted by cost inflation, is a key focus area for our cost savings and efficiency interventions going forward. On balance, we are satisfied with the progress of the strategic initiatives that we are implementing in line with our 2020 strategic plan.
Our licensed brand portfolio is developing positively following the brand re-balancing roadmap of 2020. Our marketing and product interventions on Carrera, Polaroid and Smith including its further integration into Safilo, are showing early results in countries where we have executed with excellence such as Carrera in North America and Polaroid in Spain, and our focus is on now accelerating the roll out.
We are progressing with our supply & distribution network re-invention focused on cost savings, inventory reduction and consolidation of our logistics network. Reductions of inventory days-on hand are starting to be visible, while the overall savings program is ramping up for the second half of the year, and we have announced the first regional distribution centres’ consolidation in the US. Finally, we are progressing well on the capability front and are adding expert knowledge in key business areas including Product, Supply Chain, Brand and Commercial to drive and sustain our strategic transformation.”
Economic and financial highlights
In the first half of 2015, Group total net sales totaled Euro 674.9 million, up 11.3% compared to Euro 606.3 million recorded in the same period of 2014. At constant exchange rates, turnover increased by 1.0%.
H1 2015 Gross profit was Euro 409.9 million, up 6.9% compared to Euro 383.5 million in the first half of 2014, while the gross margin moved to 60.7% from 63.3%.
H1 2015 adjusted1 EBITDA was Euro 62.7 million, down 12.6% compared to the adjusted1 EBITDA of Euro 71.7 million recorded in the same period of 2014. Adjusted1 EBITDA margin was 9.3% of net sales in H1 2015, compared to 11.8% in H1 2014.
H1 2015 adjusted1 EBIT was Euro 43.1 million, down 21.0% compared to the adjusted1 EBIT of Euro 54.5 million registered in H1 2014. Adjusted1 EBIT margin was 6.4% of net sales in H1 2015, compared to 9.0% in H1 2014.
Total net financial charges increased to Euro 22.7 million from Euro 4.5 million in H1 2014 due to the negative impact of exchange rates differences of Euro 9.9 million in the first semester (positive impact of Euro 3.4 million in H1 2014) and the effects of the fair value valuation of the option component embedded in the equity-linked bonds for Euro 4.9 million.
H1 2015Group adjusted1net result equaled a profit of Euro 9.9 million, down 68.5% compared to the adjusted1 net result of Euro 31.5 million recorded in H1 2014.
In Q2 2015, Safilo reported total net sales of Euro 350.6 million, up 12.0% compared to Euro 313.1 million recorded in the same quarter of 2014, supported by a weaker Euro. At constant exchange rates, turnover increased by 1.2%.
Q2 2015 Gross profit equaled Euro 213.4 million, up 7.0% compared to Euro 199.5 million in the same quarter of 2014. Gross margin moved to 60.9% of net sales from 63.7%.
Q2 2015 adjusted1 EBITDA was Euro 30.2 million, down 16.9% compared to the adjusted1 EBITDA of Euro 36.3 million recorded in the same period of 2014. Adjusted1 EBITDA margin was 8.6% of net sales in Q2 2015, compared to 11.6% in Q2 2014.
Q2 2015 adjusted1 EBIT was Euro 19.8 million, down 28.7% compared to the adjusted1 EBIT of Euro 27.7 million registered in Q2 2014. Adjusted1 EBIT margin was 5.6% of net sales in Q2 2015, compared to 8.8% in Q2 2014.
Total net financial charges moved to Euro 3.9 million from Euro 2.2 million in Q2 2014. Net exchange rates differences turned slightly positive in the quarter, to Euro 0.7 million (positive for Euro 2.4 million in Q2 2014) while net interest charges declined to Euro 1.9 million from Euro 2.2 million in Q2 2014.
Q2 2015Group adjusted1net result equaled a profit of Euro 7.7 million, down 49.0% compared to the adjusted1 net result of Euro 15.0 million recorded in Q2 2014.
Key Cash Flow data
In H1 2015, Free Cash Flow improved to Euro 51.6 million compared to a negative flow of Euro 6.4 million in H1 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, without which free cash flow remained nonetheless positive.
At the end of June 2015, Group net debt stood at Euro 110.1 million, down 14.2% compared to Euro 128.3 million at the end of March 2015 and 33.7% compared to Euro 166.1 million at the end of June 2014.
Rest of the world
1 In the first half of 2015, the adjusted economic results do not include non-recurring items related to commercial restructuring costs in the EMEA region for Euro 1.2 million and other non-recurring costs for Euro 1.2 million mainly related to the consolidation of the Group’s North American distribution network into its Denver facility.
In the first half of 2014, the adjusted economic results did not include non-recurring expenses for Euro 3.0 million related to the voluntary exit incentives recently signed with employees and trade unions, as the solidarity contracts come to an end, and to some reorganization costs.
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 Q2 and H1 2015 will be discussed.
Financial statement as of June 30, 2015