THE BOARD OF DIRECTORS OF SAFILO GROUP  S.P.A. APPROVES 
  THE 2017 FINANCIAL RESULTS

• Group Net Sales at Euro 1,047.0 million compared to Euro 1,252.9 million in 2016, -194 million at constant exchange rates (-15.5%), of which -155 million (-12.3%) for the change of the Gucci license into a supply agreement and -39 million (-3.2%) for the performance of the Going Forward Brand Portfolio, affected by the implementation of the new Order-to-Cash IT system in the Padua DC;
• Adjusted3 EBITDA at Euro 41.1 million compared to Euro 88.8 million in 2016;

• Adjusted3 Group net loss of Euro 47.1 million compared to a net profit of Euro 15.4 million in 2016.
Due to non-recurring items, the Group reported a net loss of Euro 251.6 million:

• Group net debt at Euro 131.6 million compared to Euro 48.4 million at the end of 2016.

Padua, March 13, 2018 - The Board of Directors of Safilo Group S.p.A. has today approved the Company’s consolidated financial statements for the year ended 31 December 20171 and examined the separate financial statements for the year ended 31 December 20171, which will be submitted for approval by the shareholders at the Annual General Meeting to be held in a single call on 24 April 2018. The Board of Directors has decided not to propose the payment of a dividend to the next Annual General Meeting.

As communicated on January 30, 2018, Safilo’s total net sales reached Euro 1,047.0 million in 2017, contracting by Euro 194 million at constant currency compared to 2016. The reduction of sales was mainly driven by the change of the Gucci license into a supply agreement, representing a net decline of Euro 155 million (-12%), and by the implementation of the new Order-to-Cash IT system in the Padua DC early in the year. That event negatively affected deliveries and, while operationally recovered from mid-year, impacted order taking and thus reduced sales and profit up to and including the fourth quarter.
In the year, the sales of the Going Forward Brand Portfolio decreased by 3.9% at constant exchange rates, with Southern European countries being more affected by the above described Padua DC issues and by the decline experienced by the Dior collections after several years of extraordinarily strong growth. On the other hand, Own Core Brands and the total of all other licensed brands grew single digits, thanks in particular to the significant progress recorded by the Group in the emerging2 markets.

At the operating level, 2017 adjusted3 EBITDA stood at Euro 41.1 million, with the margin at 3.9% of sales (Euro 88.8 million and 7.1% of sales in 2016). This result mainly reflected the contraction recorded by the Group at the gross profit level, following the dilutive effect of the change of the Gucci license into a supply agreement and the sales decline of the Going Forward Brand Portfolio. The latter event affected capacity absorption of the Group’s Italian plants and the operational leverage of the year. In 2017, in line with the announced overheads productivity program, the Group achieved cost savings of Euro 13 million, partially counterbalanced by approximately Euro 4 million of exceptional costs incurred in relation to the abovementioned Padua DC issues.

Safilo closed 2017 with an adjusted3 Group net loss of Euro 47.1 million compared to the adjusted3 net profit of Euro 15.4 million recorded in 2016.
2017 adjusted3 net result does not include a non-cash impairment charge of Euro 192.0 million on goodwill allocated to its cash generating units (as already communicated on February 27, 2018), and non-recurring costs of Euro 12.5 million (Euro 15.2 million on EBITDA).

Eugenio Razelli, Safilo Group Executive Chairman, commented:

“2017 was a complex year for Safilo, in which we faced the transformation of the Gucci license into a supply agreement and a difficult implementation of a new Order-to-Cash IT system in the Padua distribution center, this impacting our service levels and order intaking opportunities. These events significantly affected the Group economic and financial results.

On the positive side, emerging markets showed positive trends and our own core brands performed better.
  
We look towards 2018 as a brand new start for Safilo, with the announced appointment of Mr. Angelo Trocchia as new CEO to take the Company through a new phase of successful business execution and brand portfolio development. Mr. Trocchia will join Safilo, effective April 1, 2018.”

Economic and financial highlights

FY 2017

Safilo’s full year 2017 total net sales of Euro 1,047.0 million decreased 16.4% at current exchange rates and 15.5% at constant exchange rates compared to Euro 1,252.9 million in the full year 2016.
In the year, wholesales revenues equaled Euro 981.7 million, down 16.7% at current exchange rates and 15.8% at constant exchange rates compared to Euro 1,177.8 million in 2016. The net sales of the Going Forward Brand Portfolio decreased by 3.9% at constant exchange rates (-3.9% excl. retail).

The reduction of sales was mainly driven by the change of the Gucci license into a supply agreement, representing a net decline of Euro 155 million (-12%), and by the implementation of the new Order-to-Cash IT system in the Padua DC early in the year. That event negatively affected deliveries and, while operationally recovered from mid-year, impacted order taking and thus reduced sales and profit up to and including the fourth quarter.
Dior collections experienced a decline after several years of extraordinarily strong growth, while Own Core Brands and the total of all other licenses grew single digits.
2017 economic performance mainly reflected the contraction recorded by the Group at the gross profit level, following the dilutive effect of the change of the Gucci license into a supply agreement and the sales decline of the Going Forward Brand Portfolio, affecting both capacity absorption of the Group’s Italian plants and the operational leverage of the year.

In 2017, in line with its overheads productivity program, the Group achieved cost savings of Euro 13 million, partially counterbalanced by approximately Euro 4 million of exceptional costs incurred in relation to the abovementioned Padua DC issues.

2017 Gross profit equaled Euro 519.6 million, down 27.4% compared to Euro 715.6 million in 2016, with the gross margin moving to 49.6% of sales from 57.1%.

2017 adjusted3 EBITDA was Euro 41.1 million, down 53.7% compared to the adjusted3 EBITDA of Euro 88.8 million recorded in 2016. The adjusted3 EBITDA margin equaled 3.9% of net sales in 2017, compared to 7.1% in 2016. 

2017 adjusted3 EBIT equaled a loss of Euro 0.8 million compared to the adjusted3 EBIT of Euro 43.5 million for 2016.

2017 total net financial charges increased to Euro 14.0 million from Euro 6.4 million in 2016 mainly due to the negative impact of net exchange rates differences, while net interest charges remained substantially stable. 

2017 adjusted3 Group net result equaled a loss of Euro 47.1 million compared to the adjusted3 net profit of Euro 15.4 million recorded in 2016.

2017 adjusted3 net result does not include a non-cash impairment loss of Euro 192.0 million on the goodwill allocated to the Group cash generating units and non-recurring costs of Euro 12.5 million (Euro 15.2 million on EBITDA).

Q4 2017

Q4 2017 Safilo’s total net sales equaled Euro 249.2 million, down 20.6% at current exchange rates and 16.9% at constant exchange rates compared to 2016.
In the period, wholesales revenues equaled Euro 233.8 million, down 21.1% at current exchange rates and 17.7% at constant exchange rates compared to Euro 296.4 million in Q4 2016. The change of the Gucci license into a supply agreement accounted for Euro 44 million of the total Euro 53 million decrease of sales at constant exchange rates, while the sales of the Going Forward Brand Portfolio declined by 3.7% at constant currency (-5.2% excl. retail).

Q4 2017 economic performance was mainly affected by the decline in sales of the Going Forward Brands, the consequent lower absorption of fixed costs and a negative sales mix.

Q4 2017 Gross profit totaled Euro 112.0 million, down 26.2% compared to Euro 151.7 million in the same quarter of 2016. In the fourth quarter, gross margin decreased to 44.9% of net sales from 48.3% in Q4 2016.

Q4 2017 adjusted3 EBITDA equaled a loss of Euro 2.1 million compared to the positive adjusted3 EBITDA of Euro 11.4 million recorded in the same period of 2016.

Key Cash Flow data

In 2017, Free Cash Flow was negative for Euro 70.1 million compared to a positive Free Cash Flow of Euro 44.7 million in 2016, which included the second of three early termination compensation payments of Euro 30 million received in December 2016 from Kering.

The Cash Flow from operating activities, negative for Euro 31.1 million, reflected the negative economic performance of the year and a cash absorption from Working capital of Euro 36 million, which reflects in particular the decrease of other payables due to the accounting of the Kering compensation in the year. On the other hand, net working capital generated Euro 5.5 million.
Overall, the working capital incidence on net sales moved from 20.9% in 2016 to 22.1% in 2017.

In the year, Safilo invested Euro 39.0 million to continue modernizing its product supply and logistics network and to roll out EyeWay, its IT systems overhaul.

At the end of December 2017, Safilo’s net debt stood at Euro 131.6 million compared to Euro 48.4 million at the end of December 2016. The financial leverage, the calculation of which was based on the reported 2017 EBITDA adjusted4 for the non-recurring costs incurred in the year and for the extraordinary items ascribed to the implementation of the new Order-to-Cash IT system in the Padua DC, stood at 2.0x.

Markets

Europe
Full year 2017 net sales in Europe equaled Euro 469.3 million, down 12.7% at current exchange rates and 12.2% at constant exchange rates compared to Euro 537.6 million in 2016.
The sales of the Going Forward Brand Portfolio in Europe declined in the year by 8.9% at constant exchange rates, mainly due to the difficult implementation of the new Order-to-Cash IT system in the Padua DC, reducing sales up to and including the fourth quarter, and the decline experienced by the Dior collections after several years of strong growth.
In Q4 2017, net sales in Europe equaled Euro 101.6 million, down 26.6% at current exchange rates and 26.3% at constant exchange rates compared to Euro 138.4 million in the fourth quarter of 2016.
In the quarter, the sales of the Going Forward Brand Portfolio, down 17.8% at constant exchange rates, suffered in the South of Europe the tail-end of the abovementioned Padua DC issues with Fall/Winter collection sell-in restrained by the late deliveries of the Spring/Summer collection. On the other hand, the North of Europe and the Central Eastern countries had a very positive quarter, up double digits.

North America
Full year 2017 total net sales in North America totaled Euro 422.3 million, down 17.1% at current exchange rates and 15.5% at constant exchange rates compared to Euro 509.5 million in 2016. In the year, the wholesale revenues of the Going Forward Brand Portfolio decreased by 2.0% at constant exchange rates.
In Q4 2017, total net sales in North America were Euro 97.0 million, down 21.3% at current exchange rates and 14.0% at constant exchange rates compared to Euro 123.2 million in the fourth quarter of 2016.
In the quarter, the weak business environment in department stores and the transition of Marc Jacobs collections from two brands to one brand were the main causes behind the sales decline of the Going Forward Brand Portfolio in the wholesale business (-3.8% at constant exchange rates).

Sales of the 102 Solstice stores in the United States (116 stores at the end of December 2016) equaled Euro 15.4 million in Q4 and Euro 65.3 million in full year 2017, declining respectively 3.6% and 11.3% at constant exchange rates compared to the same periods of 2016. In Q4, the same store sales performance of Solstice showed a significant improvement, up 2.7% at constant exchange rates.

Asia Pacific
Full year 2017 total net sales in Asia Pacific were Euro 64.3 million, down 43.9% at current exchange rates and 42.3% at constant exchange rates, strongly impacted by the exit of the Gucci business, to which the region was over proportionately exposed. The sales of the Going Forward Brand Portfolio, down 3.2% at constant exchange rates in the year, showed an improvement in the second half of 2017, up 11.1% at constant exchange rates.
In Q4 2017, total net sales in Asia Pacific equaled Euro 18.7 million, down 23.9% at current exchange rates and 18.9% at constant exchange rates. In the period, the net sales of the Going Forward Brand Portfolio further accelerated, growing 12.6% at constant exchange rates.

Rest of the World
Full year 2017 total net sales in the Rest of the World reached Euro 91.0 million, substantially flat compared to 2016 (-0.2% at current exchange rates and -1.3% at constant exchange rates), and growing the region’s share of Group total sales from 7.3% to 8.7%. In these markets, which include both IMEA and Latin America, the sales of the Going Forward Brand Portfolio grew 14% at constant exchange rates.
In Q4 2017, total net sales in the Rest of the World were Euro 31.9 million, up 15.3% at current exchange rates and
18.6% at constant exchange rates. In the quarter, sales of the Going Forward Brand Portfolio soared, up 29.6% at constant exchange rates.

Non-cash goodwill impairment

For the purpose of its financial statements and impairment test to be performed annually, the Company determined the recoverable value of each identified Cash Generating Unit.
This work, resulting in a non-cash impairment charge of Euro 192 million on goodwill, was also based on the lower than planned economic results achieved in the period 2015-2017 and the more challenging industry context in which Safilo will operate, factors for which the Company has preliminarily assumed moderate future sales growth and a recovery of profitability through a more marked revision of its costs infrastructure.

2018 Outlook

In 2018, the Group expects normal operating conditions to be progressively restored in Safilo’s developed markets, while emerging markets should continue to grow ahead of Company average, supporting the overall brand portfolio development during the year. First quarter to date sales trends are confirming this expectation.
At constant exchange rates, the Group expects the sales of its Going Forward Brands Portfolio to return to growth in 2018 and to offset the exit of the Celine license.

In 2018, the Group plans to increase its adjusted EBITDA margin through the improvement of its gross margin, driven by better price/mix dynamics and further sourcing and logistics efficiencies, and the completion of the announced overhead productivity plan by the end of 2018.

In 2018, Safilo expects a solid level of capital expenditure, focusing investments into its core product supply chain and IT projects, while leveraging the assets created by the investments in the past 3 years and thus further decelerate the level of expenditure compared to those years.

Other resolutions by the Board of Directors

Approval of the first Sustainability Report

Together with the 2017 Annual Report, the Board of Directors of Safilo Group S.p.A. approved its first Sustainability Report (concerning 2017), in line with the application of the non-financial reporting obligation for listed companies under
Legislative Decree 254/2016.

Amendments to the 2017-2020 Stock Option Plan

The Board of Directors, on the basis of the proposal of the Remuneration and Nomination Committee, has also resolved to propose to the next Shareholders’ Meeting certain amendments to the 2017-2020 Stock Option Plan approved by the Shareholders’ Meeting on April 26, 2017, and in particular the  inclusion of a minimum exercise price of the Options and amendments to the  conditions regarding the vesting of the Options granted under the Second  Tranche.
  The updated informative document relating to the Plan, integrated with  the proposed amendments, will be published within the deadlines set forth by  applicable law.
  The abovementioned Shareholders’ Meeting has  been also convened in an Extraordinary session to approve an integration to the  resolution of the capital increase, resolved upon by the Shareholders’ Meeting  held on April 26, 2017 to serve the above-mentioned Stock Option Plan in order  to include the mentioned minimum issuance price. The related Illustrative Report will be made available to shareholders  within the terms set forth by applicable law.

Share  buy-back program

Lastly, the Board of Directors  agreed to present to the Shareholders’ meeting a new proposal for the purchase  and disposal of treasury shares for up to 2,500,000 shares subject to revocation of the authorization  granted by the Shareholders’ meeting of April 26, 2017. The purchases shall be  executed on regulated markets or on multilateral trading facilities, at a price not lower than 10% and  not higher than 5% of the average of official prices of Safilo Group shares  over the five trading days prior to the date of the purchase trade, and in any  case not higher than 10,00 EUR per share.
  The proposal aims to provide  the Company with strategic investment opportunities in the framework of the  purposes admitted by national and European laws in force, in particular, the  purchase and disposal of treasury shares may be used:
  (i) to create the so called  “reserve of treasury shares”, including the use of the purchased treasury  shares; (ii) as a compensation in extraordinary transactions, including the  exchange of shares, with other parties in the context of transactions in the  interests of the Company, (iii) to perform the obligations to deliver the  Company’s shares arising from convertible bonds or bonds cum warrants; and (iv)to  perform the obligations to deliver the Company’s shares arising from programs  of distributions, against payment or for free, of options or shares of the  Company to directors, employees and collaborators of the Company or the  relevant subsidiaries, as well as arising from programs for free allocation of  shares to the shareholders.
  Authorization to purchase shares will be  requested for a period of 18 months, as from the shareholder resolution date;  authorization to sell own shares will be requested for an unlimited period.
  As of today, the Company has no treasury shares  in portfolio.
  All information concerning the terms and procedures of the authorization  will be made available through the related Illustrative Report, to be made  available to shareholders within the terms set forth by applicable law.

Notes:

1 The consolidated and separate  financial statements are currently being audited, a process that has yet to be  completed.

2 Emerging markets comprise the  regions of India Middle East & Africa and Latin America (reported within  Rest of the World), Central Eastern Europe (reported within Europe), and  Greater China and APAC (reported within Asia Pacific).

3 In 2017, the adjusted economic results exclude: (i) an  impairment charge on the goodwill allocated to the Group’s cash generating units  for Euro 192.0 million and (ii) non-recurring costs for a total of Euro 15.3  million (Euro 15.2 and 12.5 million, respectively on EBITDA and Net result) related  to the reorganization of the Ormoz plant in Slovenia, cost saving and  restructuring initiatives, and to some legal litigations ; include: (i) an  income of Euro43 million, annual portion of the total Euro 90 million accounting  compensation for the early termination of the Gucci license.
  In Q4 2017, the adjusted EBITDA excludes: (i) non-recurring  costs for a total of Euro 10.9 million related to cost saving and restructuring  initiatives and to some legal litigations; includes: (i) an income of  Euro 10.8 million, pro-rata portion of the Euro 43 million, 2017 accounting  compensation for the early termination of the Gucci license.

In 2016, the adjusted economic results excluded:  (i) an impairment loss on the goodwill allocated to the Far East cash  generating unit for Euro 150.0 million and (ii) non-recurring restructuring  costs for a total of Euro 9.8 million (Euro 7.9 and 7.5 million, respectively  on EBITDA and Net result) due for Euro 8.6 million to overhead cost saving  initiatives, such as the 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; included:  (i) an income of Euro 8 million related to part of the total Euro 90 million  accounting compensation for the early termination of the Gucci license, and  (ii) an expense of Euro 4 million related to the final acceleration to P&L  of Gucci prepaid royalties.
  In Q4 2016, the adjusted EBITDA excluded: (i)  non-recurring restructuring costs for a total of Euro 1.5 million; included:  (i) an income of Euro 8 million related to part of the total Euro 90 million  accounting compensation for the early termination of the Gucci license, and  (ii) an expense of Euro 4 million related to the final acceleration to P&L  of Gucci prepaid royalties.

4 For the purpose of the financial leverage calculation, 2017 adjusted  EBITDA, besides the above mentioned Euro 15.2 million of non-recurring costs, excludes Euro 4 million of exceptional costs incurred in relation to the Padua DC Order-to-Cash  IT system issues and includes the profit impact resulting from the lost  revenues, estimated at Euro 45 million, in relation to the Padua DC Order-to-Cash  IT system issues.     

***

The accounting treatment of the  Euro 90 million compensation for the early termination of the Gucci license has  been decided in coherence with the underlying obligations set forth in the  Strategic Product Partnership Agreement (“SPPA”) signed on January 12, 2015  with Kering Group. According to this, it was deemed appropriate by management  to account for the majority of the compensation between 2017 and 2018,  respectively in the measure of Euro 43 million in 2017 and Euro 39 million in  2018, following the contractual split of the volumes in the two years to which the  agreed anticipated termination of the Gucci license (previously expiring at the  end of December 2018) and key obligations under the SPPA agreement refer to.
  It was considered appropriate  to recognize the remaining part of the compensation, equal to Euro 8 million,  in the profit and loss of 2016, given the start of the SPPA agreement in the  second half of the year, with the shipment of the first significant bulk of  volumes under the SPPA agreement in the fourth quarter of 2016.
  The above compensation amounts  are included in other operating income.

As a  reminder, the total Euro 90 million compensation was agreed with the contract  executed on January 12, 2015 with Kering Group that confirmed the early  termination of the Gucci license agreement at the end of December 2016 and a  Strategic Product Partnership Agreement (SPPA) for the development and  manufacture of Gucci's Made in Italy eyewear products by Safilo. The first  tranche of the compensation equal to Euro 30 million was received in January  2015, the second tranche equal to further Euro 30 million was received in  December 2016, while the third tranche will be received in September 2018.

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.

Disclaimer

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:

 
• Sales performance at constant exchange rates of the  Going Forwards Brand Portfolio is calculated excluding Gucci business from both  periods;
 
• 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 debt;
 
• 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.

Conference Call

Today,  March 13, 2018, at 6.15pm CET (5.15pm BST; 1.15pm EDT) a conference call will  be held with the financial community during which the results of FY 2017 will  be discussed.
  It  is possible to follow the conference call by calling +39 02 36009838, +44 330 3369411 o  +1 929 4770448 (for  journalists +39 02 36026027) and entering  the access code 1103581.
  A  recording of the conference call will be available until March 15, 2018 on +39 06 99749106, +44 207  6600134 o +1 719 4570820 (access code: 1103581).
  The  conference call can be followed also via live webcast at  http://investors-en.safilogroup.com. The presentation is available and downloadable  from the Company’s website.

Notice of the call of the Ordinary Shareholders' Meeting
  In  the coming days, the notice of the call of the Shareholders' Meeting will be  available on the website http://investors-en.safilogroup.com and on the central  storage of regulated information, where the Reports from the Directors to the  Shareholders' Meeting on the proposals regarding the items on the agenda, will  also be made available.

About Safilo  Group
  Safilo Group is the fully  integrated Italian eyewear creator and worldwide distributor of quality and  trust, leader in the premium sector for sunglasses, optical frames and sports  eyewear. Design inspired and  brand driven, Safilo translates extraordinary design into excellent products  created thanks to superior craftsmanship expertise dating back to 1878. With an  extensive wholly owned global distribution network in 40 countries – in North  and Latin America, Europe, Middle East and Africa, and Asia Pacific and China –  Safilo is committed to quality distribution of its products all around the  world. Safilo’s portfolio encompasses Carrera, Polaroid, Smith, Safilo, Oxydo,  Dior, Dior Homme, Fendi, Banana Republic, Bobbi Brown, BOSS, BOSS Orange, Elie  Saab, Fossil, Givenchy, havaianas, Jack Spade, Jimmy Choo, Juicy Couture, kate  spade new york, Liz Claiborne, Love Moschino, Marc Jacobs, Max Mara,  Max&Co., Moschino, Pierre Cardin, rag&bone, Saks Fifth Avenue, Swatch,  and Tommy Hilfiger.

Listed on the Italian Stock  Exchange (ISIN code  IT0004604762, Bloomberg SFL.IM, Reuters SFLG.MI), in 2017 Safilo recorded net  revenues for Euro 1,047 million.

Contacts:

Safilo Group  Investor Relations
  Barbara Ferrante
  Ph. +39 049 6985766
  http://investors-en.safilogroup.com

Safilo Group Press Office
  Antonella Leoni
  Milan – Ph. +39 02 77807607
  Padua – Ph. +39 049 6986021