First-Half 2016 Results - Essilor Group · 2016-11-24 · First-Half 2016 Results 8 Second-Quarter Like-for-like Revenue up 3.2% Second-Quarter Combined Revenue (1) up 6.9% (1) Combined

First-Half 2016 Results July 29, 2016

First-Half 2016 Results 2

Hubert Sagnières – Chairman and Chief Executive Officer

1. First-Half 2016 Highlights


Key Figures

H1 2016 Growth

(1)Growth at constant exchange rates

(2)Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs and other operating expenses)

(3)Free Cash Flow = Net cash from operating activities less change in WCR and capital expenditure

+5.1%

€3,408m €3,583m Revenue

€651m €677m 19.1% 18.9%

+4.0% Contribution from operations(2)

As a percentage of revenue

+6.4%

€1.83 €1.95

Earnings per share

+9.3%

€226m €247m

Free Cash Flow(3)

+8.1%(1)

H1 2015



Key Highlights

Combined growth(1)

of 8.1% in line with yearly objectives

Like-for-like revenue up 5.0% in Lenses & Optical Instruments: in acceleration year-on-year

Double-digit expansion in fast-growing markets(2)

Better-than-expected growth in Europe

Performance in North America impacted by a decline in Transitions Optical sales to other lens casters

Sunglasses & Readers suffered from poor weather and delayed growth at Xiamen Yarui Optical (Bolon™)

Equipment returns to growth

Strong acquisition & partnership momentum

Solid contribution from operations(3)


(1)Like-for-like growth and bolt-on acquisitions (local acquisitions or partnerships)

(2)Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America



Laurent Vacherot – Chief Operating Officer

2. Financial and Operating

Performance

3,408

3,583

+5.1%

139

138(102)

H1 2015 Revenue Like-for-like growth Bolt-on acquisitions(1) Currency effect H1 2016 Revenue

+4.1%

+4.0%

-3.0%


First-Half 2016 Revenue up 8.1% Excluding the Currency Effect

€ millions

(1) Local acquisitions or partnerships

2. Financial and Operating Performance

+8.1%


First-Half 2016 Revenue by Region and Division


Reported revenue in € millions H1 2015 H1 2016 Change (reported)

Change (excluding

currency effect)

Lenses & Optical Instruments 2,954 3,129 +5.9% +9.1%

North America 1,312 1,378 +5.0% +5.9%

Europe 904 965 +6.8% +8.4%

Asia/Pacific/Middle East/Africa 536 564 +5.3% +10.3%

Latin America 202 222 +9.5% +30.6%

Sunglasses & Readers 362 360 -0.6% +0.9%

Equipment 92 94 +2.3% +3.2%

TOTAL 3,408 3,583 +5.1% +8.1%


Second-Quarter Like-for-like Revenue up 3.2% Second-Quarter Combined Revenue(1) up 6.9%

(1) Combined growth = like-for-like growth + bolt-on acquisitions (local acquisitions or partnerships)

(2) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America

Lenses & Optical Instruments

Fast-growing markets(2)

like-for-like growth

improved from 9.3% in Q1 to 10.5% in Q2

Decline in Transitions Optical sales to

other lens casters, primarily impacting

North America

Sustained performance in Europe

Sunglasses & Readers

Unfavorable weather conditions

Delayed growth at Xiamen Yarui Optical

(Bolon™)

Solid contribution from acquisitions of

3.7%


Like-for-like revenue growth Q1 2016 Q2 2016 H1 2016

Lenses & Optical Instruments +5.7% +4.4% +5.0%

North America +4.7% +1.5% +3.1%

Europe +4.7% +4.5% +4.6%

Asia/Pacific/Middle East/Africa +8.9% +8.5% +8.7%

Latin America +9.0% +11.4% +10.3%

Sunglasses & Readers -1.5% -5.8% -3.9%

Equipment +3.5% +4.3% +4.0%

TOTAL +5.0% +3.2% +4.1%

+1.3%

+2.4%

+3.6%

+5.1%

+4.7%+5.0% +5.0%

H1 H2 H1 H2 H1 H2 H1


Solid Momentum in Lenses & Optical Instruments

2013 2014 2015 2016



11 Acquisitions as of July 29, 2016 Representing ~€130m in Full-Year Revenue


Europe

1

Latin America

4 Asia/Pacific/

Middle East/Africa

1

North America

5

Vision Direct Opti-Port

Opticas Place

Vendôme One Vision

Optical

Icare Industries

Digital Lab

Summer Vision

Ocutec

Laboratorio

Axis Medical Group

Allaboutvision.com

US Optical


North America: Healthy Lens Business, Poor Sun Season

HIGHLIGHTS

Good performance with the independent eye care professionals in the US

Decline in Transitions Optical sales to other lens casters

Sun season impacted by poor weather conditions

SUNGLASSES &

READERS

Market share gain at Costa®

New channels for FGX

LENSES & OPTICAL

INSTRUMENTS

Innovation

Launch of Eye Protect System™ range of products

New offerings for Doctor Alliances

New partnerships with two prescription laboratories

Online

Continued success of EyeBuyDirect™ and Frames Direct™

Return to growth of Clearly™ in Canada

Coastal™ still challenging in the US

H1 2016 revenue growth

excluding currency

effect, across all

business divisions

5.1%



Europe: Sustained Dynamic

HIGHLIGHTS

Good performance in major countries, Russia and Eastern Europe

Sales acceleration in Nordic countries

UK and Central Europe stable


excluding currency

effect, across all

business divisions

7.8%

SUNGLASSES &

READERS Launch of Costa® in France and Spain

LENSES & OPTICAL

INSTRUMENTS

Innovation

Success of Eyezen™ lenses in France and Switzerland

Launch of Transitions® Style Colors lenses in Italy

(four new colors)

Online

Acceleration of Lensway™ in Scandinavia

Acquisition of Vision Direct in the United Kingdom



Asia(1): Continuing Momentum in Lenses

HIGHLIGHTS

Robust growth in India and Africa

Good performance in Southeast Asia

Implementation of new shipment model at Xiamen Yarui Optical (Bolon™)


excluding currency

effect, across all

business divisions

FGM: 10.3% Total Asia: 8.8%

SUNGLASSES &

READERS

Rebound at Xiamen Yarui Optical expected in H2

Good performance of Merve in Turkey

LENSES & OPTICAL

INSTRUMENTS

Positive momentum for Transitions® and Varilux® lenses in India

Broader product range offsetting slower economy in China

South Korea driven by Perfect UV offer from Chemilens

Revenue growth in developed countries

(1) Asia/Pacific/Middle East/Africa



Latin America: Sales Acceleration Driven By Organic Growth and Acquisitions

HIGHLIGHTS

Slight acceleration in sales growth in Q2 in Brazil

Strong growth in Argentina, Colombia and Mexico

New footprint in Peru and expansion in Chile


excluding currency

effect, across all

business divisions

30.8%

LENSES & OPTICAL

INSTRUMENTS

Crizal® lenses: Healthy growth in Brazil, Mexico, Argentina,

Costa Rica and Nicaragua

Kodak® lenses: Success in Brazil and launch in Mexico

Transitions® lenses: Solid performance in Mexico

Strong dynamic in online sales in Brazil (e-Ótica, e-lens and

glasses4you™)


EQUIPMENT Recovery driven by the adoption of the digital surfacing

technology by small and mid-size labs


Profit Attributable to Equity Holders up 7.3%



Revenue 3,408 3,583 +5.1%

Contribution from operations ( 1 ) 651 677 +4.0%

Other income (expenses), net (37) (31) -

Operating profit 614 646 +5.3%

Financial income (expense), net (20) (37) -

Income tax (172) (159) -

Effective tax rate 29.0% 26.1% -

Net profit 422 450 +6.7%

Minority interests (34) (34) -

Profit attributable to equity holders 388 416 +7.3%

Earnings per share (in €) 1.83 1.95 +6.4%

€ millions ChangeH1 2016H1 2015

Rise in US interest rates

Gain on FX in H1 2015

Partial script dividend

Geographic mix


Contribution from Operations(1) up 4%



Revenue 3,408 3,583 +5.1%

Gross profit 2,041 2,135 +4.6%

% of revenue 59.9% 59.6%

EBITDA 835 866 +3.8%

% of revenue 24.5% 24.2%

Contribution from operations (1) 651 677 +4.0%

% of revenue 19.1% 18.9%

€ millions H1 2016 ChangeH1 2015

Efficiency gains

Transitions Optical sales

to other lens casters

Acquisitions

Incremental media

spend

19.1%18.9%

0.5%-0.2%

-0.5%

H1 2015 Operating leverage and

synergies

Incremental media

spend

Acquisitions(2) H1 2016


Contribution from Operations(1) at 18.9% of Revenue

Contribution from operations as a percentage of revenue

(1) Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs and other operating expenses)

(2) Bolt-on acquisitions (local acquisitions or partnerships)


Bolon performance

Preparing the future:

FGM, 2.5 NVG, …

Trade up/Innovation

Efficiency gains

4.6% 4.7%

5.6%

4%

4.8%

3.6%

2%

3%

4%

5%

6%

7%

2011 2012 2013 2014 2015 H1 2016

192 232

285

227

321

129


Capital Expenditure: Continuing to Invest in Long-term Growth


Capital expenditure in € million (net of disposals) As a percentage of revenue

66

29383

103

145625

233


Free Cash Flow(1) up at €247m, up 9.3%

(1) Free cash flow corresponds to net cash from operating activities less change in WCR and capital expenditure

(2) After disbursement of the fine to the Bundeskartellamt (BKA) that was set aside in 2010, for a total amount of €63m, including accrued interest

(3) Including €38m of foreign exchange impact and €3m of capital increase

(4) The theoretical 2015 dividend amounted to €237.1 million. However, the option to receive the dividend in shares was taken up by 67.6% of shareholders and the cash dividend effectively

disbursed amounted to €79.1 million.

Operating cash flow(2)

(excl. change in WCR)

Capital expenditure

Change in WCR

Dividends(4)

Net financial investments

€ millions

+247

Reported change in net debt

Foreign exchange, capital increase and others

(3)



Net Debt as of June 30, 2016: 1.3x EBITDA(1)


Strong cash generation

Working capital usual seasonality

Disbursement of the fine to the BKA

Acquisitions

An active first-half

Earn-out & put options

(1) For the last 12 months ended June 30, 2016

2,1682,089

2,172

1.41.3 1.3

H1 2015 2015 H1 2016

Net debt Net debt/EBITDA

First-Half 2016 Results

Continued momentum in fast-growing markets

New initiatives for Transitions® lenses

Eyezen™ and Eye Protect System™ product ranges

Acceleration in online sales

21

H2 2016 at a Glance

Lenses

& Optical Instruments


New channels/countries for Costa®, FGX and Bolon™ products

Xiamen Yarui Optical (Bolon™) back to growth in the course of H2

Sunglasses

& Readers

Good order book in the Equipment division

Consumer branding across all businesses

Solid acquisition pipeline

Capital expenditures to sales: around 4% for FY16

Group-wide


Hubert Sagnières – Chairman and Chief Executive Officer

3. Strategy and Outlook


A Powerful Growth Strategy

Size and growth of industry segments by 2018 / Prescription sun lenses are included in prescription lenses

Fast-Growing Markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America


Innovation

Consumer Focus and Branding

Partnerships and Acquisitions

Business Interconnections

10-12%

FAST-GROWING

MARKETS

€5.8bn

~ €28.5bn 6-7%

€5.8bn 14%

ONLINE

€10bn

SUNGLASSES

& READERS

6-7%

€12.7bn 3-4%

PRESCRIPTION

LENSES


A Lot of Upside Left for Essilor

Total market share in units:

ONLINE

~1,260 m lenses

PRESCRIPTION

LENSES

Market units

Essilor market share

~41%

610-650 m pairs

SUNGLASSES

Market units


250-300 m pairs

READERS

Market units


~15%

~€4bn

Market value


~5% ~15%

Source: Essilor – 2015 estimates, Estin

~25%



Lenses & Optical Instruments: Many Robust Initiatives in H2

(1)Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America


Deployment of Eyezen™ lenses

Launch of Eye Protect System™ range of products

Focus on Transitions® lenses

Products

North America: Deployment of product & service

offerings to our doctor alliances

Europe: Product mix improvement

Fast-Growing Markets(1): Continued momentum

Online: Acceleration in all geographies

Consumer branding: Further benefits in H2

Geographies

Consumers


Sunwear: Xiamen Yarui Optical to Improve in H2


Powerful long-term success story

>30% revenue CAGR since 2012

Increased capacity with a new plant

Long-term

New distribution channels: direct to ECPs, travel retail

Geographic expansion: Thailand, Malaysia, Vietnam

and the Philippines

Development of prescription lenses

Gradual recovery in shipments

Return to growth expected in the course of H2

Mid-term

Short-term


Sunwear: Many Upcoming Developments


New viral campaign: Leafcutter

Channel expansion: Travel retail, doctor alliances

Geographic expansion: US and abroad

Costa®

Collection renewal opportunities in several key

accounts in H2

Osse™ / Mustang™ (Merve): In the like-for-like scope

from July 1st, 2016

New contracts with performance and luxury brands

validate our strategy

FGX

New

Opportunities


Online: Optimization of Business Model to Enhance Growth


New consumer experience at Clearly™/Coastal™

Launch of EyeBuyDirect™ in new countries

Product expansion at VisionDirect

Cross-selling our sunwear brands on most websites

Entering new geographies: India

Organic

Growth

Strengthening geographic and product coverage

Gearing up for powerful technology enablers

Acquisitions

New

Technologies


Setting the Ground for Acceleration in Fast-Growing Markets(1)

(1) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America


BRAZIL

New partnerships

Branding

Online models

INDIA

Entry in Sunwear

Building online offering

CHINA

Pioneering online models

Vision ambassadors

New plant for Xiamen Yarui

Optical (Bolon™)

€2.8bn Revenue Ambition by 2018

CHILE, COSTA RICA

& NICARAGUA

Integrated retail model

TURKEY

Merve Sun brands:

Building momentum

AFRICA

New Kodak® frames & lenses

offering in Morocco

2.5 NVG and Charity

active in 12 countries

Pipeline of acquisitions

RUSSIA

Building brand equity

Contact lenses

ASEAN

2.5 NVG models

Pipeline of acquisitions

PERU

New footprint


A Strong Mission At the Core of Solid Execution and Motivation


Improving Lives by

Improving Sight

7.2 billion people worldwide

63% in need of vision correction

100% in need of vision protection

Source: Essilor – 2015 estimates


Outlook: Long-Term Objectives Unchanged


(1) Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs and other operating expenses)

(2) Excluding any additional significant acquisitions.

2016 Revenue Growth

Like-for-like

Excluding currency effect

2016 Contribution from operations(1)(2)

as a percentage of revenue

2018 Like-for-Like Growth

>8%

Around 4.5%

≥18.8%

>6%

Questions & Answers

Documents

First-Half 2016 Results - Essilor Group · 2016-11-24 · First-Half 2016 Results 8 Second-Quarter Like-for-like Revenue up 3.2% Second-Quarter Combined Revenue (1) up 6.9% (1) Combined