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The Board of Directors approves the results of the First Half of 2016
Sales of the going-forward brands gain momentum with Q2 growing 9%
Progress on cost savings contributed to improved
Padua, August 3, 2016 - The Board of Directors of Safilo Group S.p.A. has today reviewed and approved the results of the first half of 2016.
The first half of the year was one of improving overall momentum as the period progressed, in particular from sales of the going forward brands in Europe, North America and Rest of World namely IMEA and in the cost saving and operational improvement programmes.
Net sales for the first six months of 2016 registered a decline of 3.5% at current exchange rates and of 2.1% at constant currencies while sales of the going-forward brands portfolio increased by 5.3%. Business recovered momentum during the second quarter, with revenues broadly flat at current exchange rates (-0.3%) but growing 2.0% at constant exchange rates. This reflected the improved sales performance of the going-forward brands portfolio, increasing in the second quarter by 9.0% at constant exchange rates and more than offsetting the negative impact of the brands that the Group stopped/will stop servicing. Progress was particularly evident in Europe as well as in the Group's core business in North America and in IMEA, while Asia remained subdued.
In the first half of 2016, the gross profit margin was substantially in line with the same period of 2015, at 60.6% of sales. In the second quarter of the year, gross profit margin stood at 60.2% of sales compared to 60.9% in the second quarter of 2015.
In the first six months of 2016, the Group's adjusted1 net result increased 130.6%, mainly reflecting positive dynamics in net financial charges.
At the end of June 2016, Group net debt stood at Euro 102.8 million, improving from the position of Euro 110.1 million at the end of June 2015.
Our gross margin was in line with last year while we progressed our supply network modernization focused on in-sourcing production into our own worldwide plant network and reshoring back to Italy, and simplifying our manufacturing and logistic flows. At the operating level, we progressed with the implementation of our cost savings program to improve our overheads productivity.
We continued to sharpen our focus on our own core brands, by concluding the integration of Polaroid with the closure of the Vale site, qualifying our stylistic direction for Carrera, while Smith built market share despite a difficult sports market environment in North America."
Economic and financial highlights
In the first half of 2016, Group total net sales of Euro 651.1 million decreased 3.5% at current exchange rates and 2.1% at constant exchange rates compared to Euro 674.9 million in the same period of 2015.
Gross profit of Euro 394.6 million declined 3.7% compared to Euro 409.9 million in the first half of 2015, while the gross profit margin of 60.6% was substantially in line with the margin recorded in the first half of 2015.
Adjusted1 EBITDA of Euro 58.3 million declined 7.0% compared to the adjusted1 EBITDA of Euro 62.7 million recorded in the same period of 2015. The adjusted1 EBITDA margin of 8.9% was 40 basis points lower than the 9.3% posted in H1 2015, primarily due to lower sales.
Adjusted1 EBIT of Euro 37.5 million decreased 12.8% compared to the adjusted1 EBIT of Euro 43.1 million registered in H1 2015. Adjusted1 EBIT margin of 5.8% compared with 6.4% in H1 2015.
In the first half of 2016, total net financial charges were positive for Euro 0.8 million compared to a negative impact of Euro 22.7 million in H1 2015. This reflected lower net interest charges and the positive impacts of the net exchange rates differences and the fair value valuation of the option component embedded in the equity-linked bonds.
The above, coupled with a lower tax rate, enabled Safilo to post aGroup adjusted1net result of Euro 22.9 million, up 130.6% compared to the adjusted1 net result of Euro 9.9 million recorded in H1 2015.
In the second quarter of 2016, total net sales of Euro 349.5 million, were broadly flat (-0.3%) compared to Euro 350.6 million in the same quarter of 2015, whereas they increased 2.0% at constant exchange rates.
Gross profit of Euro 210.4 million declined 1.4% compared to Euro 213.4 million in the same quarter of 2015. Gross profit margin of 60.2% declined 70 basis points compared to 60.9% in the second quarter of 2015.
The adjusted1EBITDA of Euro 33.1 million increased 9.7% compared to the adjusted1 EBITDA of Euro 30.2 million recorded in the same period of 2015. The adjusted1 EBITDA margin of 9.5% increased 90 basis points compared to 8.6% in Q2 2015.
Key Cash Flow data
In H1 2016, Free Cash Flow equaled a negative flow of Euro 9.3 million compared to a positive flow of Euro 51.6 million in H1 2015, with the latter benefitting from the first of three compensation payments of Euro 30 million received in January 2015 from Kering.
Working capital absorbed Euro 18.9 million in the period, reflecting higher trade receivables due to sales growth acceleration in the second quarter (notwithstanding a continuing satisfactory ratio of days of sales outstanding), and an increase in inventories.
At the end of June 2016, Group net debt stood at Euro 102.8 million, improving 6.3% compared to Euro 109.7 million at the end of March 2016 and 6.6% compared to Euro 110.1 at the end of June 2015. The adjusted1 financial leverage stood at 1.0x at the end of June 2016.
Sales in the 118 Solstice stores in the United States declined 17.7% and 18.2% at constant exchange rates, respectively in H1 and Q2 2016.
Rest of the world
1 In the first half of 2016, the adjusted operating results do not include non-recurring costs for a total of Euro 7.1 million (Euro 6.1 million on EBITDA), related for Euro 5.9 million to overhead cost saving initiatives, such as the planned integration of Vale of Leven (Scotland) Polaroid lens production into Safilo's China based corporate supply network, and for Euro 1.2 million to commercial restructuring costs in the EMEA region.
In the first half of 2015, the adjustedeconomic results do not include non-recurring costs for a total of Euro 2.4 million 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.
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, August 3, 2016, at 6.30 pm CEST (5.30pm BST; 12.30pm EDT) a conference call will be held with the financial community during which the results of H1 2016 will be discussed.
Financial statement as of June 30, 2016