2014 Results

2014 Results
 February 19, 2015
Agenda
Introduction
2014 Results
Strategy
Online Business
Sun Business
Outlook
2014 Results
2
Improving Lives
by Improving Sight
2014: A Year of Strong Growth
2013
€5,065m
Revenue
Growth
+13.4%(6)
+2pts
37%
Volume share(1)
Adjusted contribution from operations
(2)
As a percentage of revenue
Adjusted earnings per share
(2)
Free cash flow(4)
Dividend per share(5)
(3)
€920m
+15.0%
2014
€5,670m
39%
€1,057m
18.6%
18.2%
€2.87
+6.3%
€3.05
€546m
+47%
€800m
€0.94
+8.5%
€1.02
(1) Volume share for Lenses and Optical Instruments
(2) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen Yarui Optical)
(3) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment
(4) Free cash flow = Net cash from operating activities less change in WCR and net capital expenditure
(5) To be submitted to shareholder approval at the May 5, 2015 Annual General Meeting
(6) Growth at constant exchange rates
2014 Results
4
North America and Fast-Growing Markets
Leading the Way in Lenses
 North America up 8% : Strong momentum driven by innovation and brands
(1)
 FGM in Asia/M.-East/Afr. up 14% : Strong demand for better vision, China, India
(2)
(1)
 Latin America up 15% : Innovation and mid-tier fueling growth
(1)
(1) 2014 combined revenue growth: like-for-like and bolt-on acquisitions
(2) Fast-Growing Markets: ASEAN, China, Hong Kong, India, South Korea, Taiwan, the Middle East and Africa
2014 Results
5
Sun and Online above Expectations
 Bolon: Strong growth model based on branding and distribution
 Costa: Successful positioning and distribution model
 Online: Solid demand for affordable single vision eyeglasses
2014 Results
6
A Dynamic Year for Acquisitions and Partnerships
 9.7% revenue growth driven by the successful execution of M&A strategies
(1)
 10 new countries for Essilor in 2014
 Successful integration plans
(1) 2014 revenue growth driven by bolt-on and strategic acquisitions
2014 Results
7
Efficient Cost Management, Operations and
Supply Chains
 495 million lenses
(1)
produced in 33 plants
 140 million pairs of readers and sunglasses
 Synergies from acquisitions successfully executed
(1) Including 30 million non-prescription sun lenses
2014 Results
8
A Strong Global Organization to Improve and
Protect the Vision of 7.2 Billion People in the World
Europe
North America
(1)
 815 million people
(2)
 12,100 employees
Paris
(1)
 360 million people
(2)
 13,500 employees
Vancouver
Moscow
Baar
Tokyo
Rhode Island
Dallas
Casablanca
Dubai
Bangalore
Shanghai
Bangkok
Mexico
Nairobi
Bogota
Abidjan
Singapore
Rio de Janeiro
Johannesburg
Asia/Pacific
(1)
Africa/Middle East
(1)
 1.3 billion people
(2)
 2,400 employees
(1) Source: Worldbank
(2) Essilor employees as of December 31, 2014
 4.1 billion people
(2)
 24,000 employees
Sydney
Latin America
(1)
 615 million people
(2)
 6,000 employees
Essilor headquarters
Regional hubs
2014 Results
9
58,000 People Focused on a Powerful Mission
Improving
and Protecting
the Vision of
7.2 Billion People
in the World
Members of Essilor’s Executive Committee
2014 Results
10
Agenda
Introduction
2014 Results
Strategy
Online Business
Sun Business
Outlook
2014 Results
11
Full-Year 2014 Performance vs. Guidance
FY 2014
February 2014
Guidance
 Revenue Growth:
 Like-for-like

3.7%
2.5% to 4%
 Like-for-like + Bolt-on acquisitions

8.6%
7% to 9%
 Total revenue growth

13.4%
10% to 12%
 Adjusted contribution from operations 
18.6%
(1)
(excluding currency effect)
as a percentage of revenue
(1) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen Yarui Optical).
Bolt-on acquisitions = Local acquisitions and partnerships
Contribution from operations = Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment.
2014 Results
12
Fourth-Quarter Revenue Up 17.8%
 Like-for-like growth: 5%
 Share gains in a healthy US market
 Greater momentum in all fast-growing markets
 Rebound of Sunglasses & Readers driven by Bolon
 Strong contribution from acquisitions
 Strategic acquisitions: 6.2% positive impact
 Bolt-on acquisitions(1): 2.8% positive impact
 Favorable currency impact of 3.9%
(1) Bolt-on acquisitions = Local acquisitions or partnerships
2014 Results
13
Adjusted P&L:
Contribution from Operations up 15%
(1)
(2)
2013
2014
(1)
Adjusted(1)
% Change
Revenue
5,065
5,670
+12.0%
Gross profit
2,841
3,328
+17.1%
% of revenue
56.1%
EBITDA
1,173
1,365
% of revenue
23.2%
24.1%
920
1,057
In € millions
Contribution from operations(2)
% of revenue
Adjusted
18.2%
58.7%
+16.4%
+15.0%
18.6%
(1) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen Yarui
Optical), except for revenue
(2) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill
impairment.
2014 Results
14
Revenue up 13.4% Excluding Currency Effect
Currency impact
positive at year-end:
+3.9% in Q4 2014
In € millions
(73)
244
247
187
-1.4%
+4.8%
+4.9%
5,670
+3.7%
+12.0%
 +8.6%
5,065
 +13.4%
2013 Revenue
Like-for-like
growth
Bolt-on
acquisitions (1)
Strategic
acquisitions (2)
Currency
effect
2014 Revenue
(1) Local acquisitions and partnerships, including Xiamen Yarui Optical and Costa.
(2) Transitions Optical and Coastal.com.
2014 Results
15
2014 Revenue by Region and Division
% Change
2013
2014
% Change
(reported)
(like-for like and bolt-on
acquisitions(1) combined)
4,505
4,970
+10.3%
+6.5%
North America
1,770
2,038
+15.1%
+7.8%
Europe
1,572
1,653
+5.2%
+0.9%
Asia/Pacific/Middle East/Africa
812
898
+10.6%
+10.7%
Reported revenue in € millions
Lenses and Optical
Instruments
Latin America
351
381
+8.6%
+15.1%
Sunglasses & Readers
355
503
+41.7%
+41.9%
Equipment
205
197
-3.7%
-3.0%
5,065
5,670
+12.0%
+8.6%
TOTAL
Fast-Growing
(2)
Markets :
+13.6%
Developed
Markets:
+2.7%
(1) Local acquisitions and partnerships.
(2) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa and the Middle East.
2014 Results
16
Business Review by Division
Lenses and Optical
Instruments
+6.5%
combined growth
(1)
Like-for-like revenue growth
Sunglasses & Readers
+41.9%
combined growth
(1)
Like-for-like revenue growth
Equipment
-3.0%
combined growth
(1)
Like-for-like revenue growth
+5.1%
+3.6%
H1 2014
H2 2014
 Success of new products
and key brands
 Consumer advertising
 Stronger positioning in
photochromics thanks to
Transitions
 Online business fueled by
Coastal.com
-1.4%
-0.5%
-3,0%
-0.8%
H1 2014
H2 2014
H1 2014
H2 2014
 Strengthening of sunwear
portfolio led by successful
integration of acquisition
 Sharp rebound in Q4 (6.7% likefor-like) driven by Bolon®
 Major inventory rundown impact
for FGX in the US
 Fast growth in Europe and in
Latin America
 Sharp rebound in Q4 (7.2% likefor-like) led by the adoption of a
new lens blocking technology
 Pause in order intake for digital
surfacing machines
 Negative mechanical impact of
Group acquisitions on division’s
out-of-group revenue
(1) 2014 revenue growth: like-for-like and bolt-on acquisitions combined
2014 Results
17
Lenses and Optical Instruments by Region
North America
+7.8%
combined growth
(1)
Like-for-like revenue growth
Europe
+0.9%
combined growth
Asia/Pacific/M.-East/Afr.
+10.7%
(1)
Like-for-like revenue growth
combined growth
+15.1%
(1)
combined growth
Like-for-like revenue growth
+13.5%
+4.1%
H1 2014
+7.9%
H2 2014
+3.0%
H2 2014
 Consumer advertising
 Strong growth for Crizal &
Xperio
 Gains in contact lenses
 Success in managed care
and chains
 Good momentum in Canada
 Strong performance of
EyeBuyDirect and
FramesDirect
-0.5%
+0.6%
 Strong momentum in the
UK and Southern Europe
thanks to key accounts
 Negative impact of a
contract loss in Central and
Northern Europe
 Good underlying business
with ECPs supported by
product innovation and
consumer branding
(1)
Like-for-like revenue growth
+10.5% +10.3%
+5.9%
H1 2014
Latin America
H1
H2
FGM
(2)
H1
+1.3%
H2
H1 2014
H2 2014
DM
 India, China, Middle-East:
double digit growth
 Steady rise in sales of
Crizal, Varilux and Nikon
lenses
 Strong growth in Australia
 Overall performance
impacted by challenging
conditions in Japan in H2
 Sustained development
of major brands in Brazil
supported by media push
 Launch of Kodak in Brazil
and Nikon in Columbia
 Success with large
accounts
(1) 2014 revenue growth: like-for-like and bolt-on acquisitions combined
(2) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa and the Middle East.
2014 Results
18
On Track to Achieve our €2.8bn Revenue
Ambition by 2018 in Fast-Growing Markets
(1)
2014 Revenue up 21.1% at €1,261m
22.2% of Group revenue
Russia
+41%
China
+50%
Africa-Middle East
+17%
India
+20%
South East Asia
+11%
Latin America
+17%
(1) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America
Revenue growth: like-for-like and bolt-on acquisitions combined, including: Lenses and Optical Instruments, Equipment and Sunglasses & Readers.
2014 Results
19
Strategic Acquisitions and New Partnerships
Representing €525m in Full-Year Revenue
(1)
2 Strategic Acquisitions
10 Bolt-on Acquisitions
€360m
 Sales to third parties:
€151m since acquisition (April 1)
 Major product launches in 2014:
 Transitions Signature
 Graphite Green
€165m
Europe
3
North America
3
Asia/Middle East/Africa
3
Latin America
1
 Sales: €93m since acquisition
(May 1)
(1) Local acquisitions and partnerships.
2014 Results
20
Adjusted Contribution from Operations
at its Highest Level
(1)
(2)
Contribution from operations as a percentage of revenue
-20 bps
-50 bps
+100 bps
+70 bps
-60 bps
-20 bps
+30 bps
+10 bps
18.6%
18.6%
18.5%
18.2%
2013 Adjusted
Transitions
Optical without
synergies
Coastal.com
Bolt-on
acquisitions(3)
2014
before operating
leverage,
synergies and
investment in
media
Operating
leverage and
synergies from
Transitions
Optical
Incremental
media spend
2014 Adjusted
(1) Adjusted in 2014 for €15m, of which €13m step-up on inventories stemming from major acquisitions (Transitions Optical, Costa and Xiamen Yarui Optical)
Adjusted in 2013 for €3m step-up on inventories from the acquisition of Xiamen Yarui Optical.
(2) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment.
(3) Local acquisitions and partnerships, including Xiamen Yarui Optical and Costa.
2014 Results
21
Adjusted Contribution from Operations
before PPA and Bolt-on Acquisition Costs: 19.8%
(1)
(2)
In € millions
2012
2013
2014
Revenue
4,989
5,065
5,670
893
920
1,057
PPA
(27)
(30)
(64)
Bolt-on acquisition costs
(6)
(8)
(4)
-70 bps
-70 bps
-120 bps
(12)
(14)
(24)
(1)
Adjusted contribution from
(2)
operations
(1)
Impact on adjusted contribution
(2)
from operations
Full EPS impact (in cents)
(1) Adjusted for non-recurring items resulting mainly from major acquisitions
(2) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expense and goodwill impairment
2014 Results
22
EPS Up 9.4% Excluding Currency and Coastal.com
2013
Adjusted(1)
2014
Adjusted(1)
Contribution from operations(2)
920
1,057
Other income (expenses), net
(63)
(68)
Operating profit
857
989
Financial income (expense), net
(20)
(44)
Income tax
(202)
(246)
Effective tax rate
24.1%
26.0%
Net profit
657
702
Minority interests
(54)
(60)
Profit attributable to equity holders
603
642
Earnings per share (in €)
2.87
3.05
In € millions
(1) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen
Yarui Optical), except for revenue.
(2) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and
goodwill impairment.
Strategic
acquisitions
financing
Geographic mix
Withholding tax
Increase mainly
stemming from
Xiamen Yarui
Optical integration
€3.14
Excl. currency
& Coastal.com
2014 Results
23
Capital Expenditure:
Continuing to Invest in Long-term Growth




9%
8%
Production capacity: Brazil, Laos
Headquarters in Asia (Singapore) and in Brazil (Rio)
FGX Rhode Island distribution center
H2 capital expenditure to sales: 4.4%
7%
183
285
6%
5%
192
5.9%
232
5.6%
227
116
4%
124
4.7%
4.6%
4.0%
3%
3.5%
2%
3.2%
1%
0%
2008
2009
Capital expenditure (net of disposals)
2010
2011
2012
As a percentage of revenue
2013
2014
XX in € millions
2014 Results
24
Free Cash Flow Up 47%
(1)
In € millions
Operating cash flow
(excl. change in WCR)
Change in WCR
(2)
1,022
232
Capital expenditure
228
Dividends
36
+800
10
1,851
Reported change in net debt
Capital increase
Share buybacks
Net financial investments
1,424
67
176
Other
(3)
(1) Free cash flow = net cash from operating activities less change in WCR and capital expenditure
(2) Improvement reflects €56m in non-recurring items
(3) Other items include the positive €167-million currency effect.
2014 Results
25
Net Debt: 1.3x Adjusted EBITDA at Dec. 31, 2014
(1)
In € millions
2,166
1,793
Financing key acquisitions:
 Transitions Optical: USD 1.73bn
 Coastal.com: CAD 430m
 Costa: USD 270m
369
237
2012
2013
H1 2014
2014
(1) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen Yarui Optical).
2014 Results
26
Dividend per Share: up 8.5% to €1.02*
1.02
0.94
0.83
0.85
0.88
0.70
0.62
0.66
215
129
2007
137
2008
172
177
2010
2011
185
198
147
2009
2012
2013
2014*
* To be submitted for shareholder approval at the May 5, 2015 Annual General Meeting
2014 Results
27
2015 at a Glance
Revenue



Launch of new products: Eyezen,
new Varilux range, Transitions, etc.
Financials

Contribution from operations:
Benefits of media spend ramping up
throughout the year
- Strong lift from Transitions in H1
Momentum in Fast-Growing
Markets
- Efficiency programs

Potential slowdown in Transitions’
third-party sales

Lift from Bolon, Costa and expected
rebound at FGX in the US

Strong development of online
platforms

Bolt-on acquisitions pipeline

Strong lift from currencies: c.+9% at
end of January 2015 rates
- Innovation/New products
- Bolt-on dilution skewed towards
H2

Net debt impacted by the full-year
consolidation of Transitions Optical
and Coastal

Tax rate at c.26%

Capital expenditure between 4%
and 5% of revenue
2014 Results
28
Agenda
Introduction
2014 Results
Strategy
Online Business
Sun Business
Outlook
2014 Results
29
A Strategy Delivering
Sustainable Long-term Performance
Logarithmic scale
100000
(1)
Market Capitalization CAGR
+17%
10000
(1)
Revenue CAGR
1000
(1)
Net Profit CAGR
+11%
+13%
(2)
100
10
1
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2014
One of the best Total Shareholder Returns
of the CAC 40 and Euro Stoxx 50 over 40 years
(3)
(4)
(1)
(2)
(3)
(4)
(1)
CAGR :
18.6%
1975-2014 CAGR
Net profit adjusted in 2013 and 2014 for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen Yarui Optical)
Total Shareholder Return: share price appreciation + reinvested dividends
Source: Nasdaq Corporate Solutions via Thomson ONE IR / Period: October 28, 1975 (Essilor IPO) to January 31, 2015
2014 Results
30
A Unique Combination Driving for Success
A powerful mission
Poor vision is the biggest
handicap in the world
A clear strategy
Innovation & partnerships
Strong teams
Entrepreneurial & global
 Employees aligned with shareholders through employee shareholder
program and Valoptec governance
2014 Results
31
2015-2018:
Fulfilling our Mission on a Bigger Playing Field…
2008-2013
2013-2018
PRESCRIPTION
LENSES
Manufacturers,
Distributors &
Laboratories
<€11.0bn
 3-4%
FASTGROWING
MARKETS
 10-12%
PRESCRIPTION
LENSES
SUNGLASSES
ONLINE
€12.7bn
€8.5bn
€5.8bn
 3-4%
 6-7%
 14%
€27.0bn
 6-7%
Superior Products & Innovative Services
Operational Efficiency
2014 Results
32
... With Strong and Growing Demand
for Better Vision…
4.5bn people in need of
vision correction
/ +2%
(1)
1.9bn people wearing
eyeglasses
/ +3%
(1)
1.7bn myopes
2.1bn presbyopes
+3%
+2.5%
(1)
(1)
1.4bn
Only
people wearing sunglasses
260m cataracts +3.6%
120m AMDs +2.6%
(1)
(2)
(1)
(1) CAGR
(2) Age-related Macular Degeneration
Source: Essilor - 2015 estimates
2014 Results
33
... A Powerful Ambition for 2018…
PRESCRIPTION
LENSES
FAST  Revenue:
GROWING
€2.8bn
MARKETS
 >5% like for like
revenue growth
SUNGLASSES
ONLINE
 Revenue:
€1.1bn
 Revenue:
€400-500m
 Contribution from
operations(1):
in the high teens
 Contribution from
operations(1):
10-12%
 Total revenue: €8.2bn
 Like-for-like revenue growth >6%
 EBITDA ~€2bn
 Free cash flow(2) ~€1bn
(1) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment / as a % of revenue
(2) Free cash flow = Net cash from operating activities less change in WCR and net capital expenditure
2014 Results
34
… And an Effective Action Plan
to Deliver Value Across Every Business
PRESCRIPTION
LENSES
Accelerate
FAST  New Products
GROWING  New Countries
MARKETS
 Partnerships
SUNGLASSES
ONLINE
Performance
& Mid-tier
Grow fast in a
profitable channel
 Innovation
 Consumer marketing
push
 Performance sunwear
 Coastal turnaround
 Prescription solutions
 Consumer marketing
 Leveraging Transitions
 Consumer marketing
 Online solutions for
retailers
Acquisitions and partnerships delivering growth and synergies
2014 Results
35
Bigger Playing Field: Faster Growth,
Higher Dollar & Fast-Growing Market Exposures
Europe
+5%(1)
30%
North America
+16%(1)
2014 Revenue: 45%
€5,670m
Asia/Pacific/
Middle East/Africa
+22%(1)
18%
7%
Latin America
+17%(1)
(1) 2014 Revenue growth excluding currency effect
2014 Results
36
A Pure Player in Optics Leveraging Business
Interconnections to Boost Value Creation
ONLINE
PRESCRIPTION LENSES
One consumer
One playing field
SUNGLASSES
2014 Results
37
Our Focus in 2015/2016
Mission /
Awareness
Fast-Growing
Markets
Innovation
Interconnected
Business Model
for Accelerated
Value Creation
Online
Consumer
Marketing
Sun
2014 Results
38
Innovation: Essilor’s Core Growth Driver
Mission /
Awareness
FastGrowing
Markets
Interconnected
Business
Model
Online
Strategic objectives
Business interconnections
Innovation
Consumer
Marketing
Sun
Value creation
Breakdown of R&D expenses
in the optical industry
Other
Industry
Players
c.25%
 Affordable innovations to
Fast-Growing Markets
c.75% Essilor
Source: Essilor
 Pricing power
 Stretch Essilor’s lead
 Know-how transfers to
sunglasses
 Improving consumer
experience in online
shopping
 Revenue: +
 Contribution from
operations: ++
 Free cash flow: +
Contribution from operations = Operating profit before compensation costs of share-based payments, restructuring costs, other income & expenses and goodwill impairment
Free cash flow = Net cash from operating activities less change in WCR and net capital expenditure
2014 Results
39
Mission /
Awareness
Introducing
FastGrowing
Markets
Innovation
Interconnected
Business
Model
Online
Consumer
Marketing
Sun
A complete range of new digital lenses
designed for a connected life
An exclusive power
distribution technology
A unique light filtering
technology
(1)
Relaxing eyes today while protecting vision health tomorrow
(1) Pending patents
2014 Results
40
Healthy Portfolio of New Products in 2015
Mission /
Awareness
FastGrowing
Markets
Innovation
Interconnected
Business
Model
Online
Consumer
Marketing
Sun
New
New
2014 Results
43
Consumer Marketing Raising
Awareness and Revenue Growth
Mission /
Awareness
FastGrowing
Markets
Interconnected
Business
Model
Online
Strategic objectives
Business interconnections
Innovation
Consumer
Marketing
Sun
Value creation
 Getting closer to the
consumer in every
business:
 €193m to be invested
in 2015
Sun
26
 Fuel like-for-like revenue
growth
 Pricing power
 Develop brand
awareness and loyalty
 Category development
 Revenue: ++
Online 48
119
Prescription
brands
 Contribution from
operations: =/+
 Free cash flow: =
2014 Results
45
Leveraging Group Capabilities
Towards Superior Sunwear Offerings
Mission /
Awareness
FastGrowing
Markets
Interconnected
Business
Model
Online
Strategic objectives
Business interconnections
Innovation
Consumer
Marketing
Sun
Value creation
 Prescription Sun
 Online Bolon sales
 Innovate beyond fashion:
boost lens performance
 Acquire and develop
strong regional brands
 Multiple price points &
channel expertise
 Innovation: E-SPF 50
 Synergies with
Transitions
(Xperio React, Snow goggles
for Dragon Alliance Eyewear,
Safe Riders in India, etc.)
 Revenue: +
 Contribution from
operations: =/+
 Free cash flow: +
2014 Results
46
Online Solutions Pushing
Overall Demand for Optical Products
Mission /
Awareness
FastGrowing
Markets
Interconnected
Business
Model
Online
Strategic objectives
Business interconnections
Innovation
Consumer
Marketing
Sun
Value creation
 Online demand:
prescription, frames,
sunglasses, contact
lenses
 Education and
information
 Worldwide accessibility
 Accelerate category
penetration
 Segment the industry
 Offerings for eye-care
professionals
 Supply chains
 Revenue: +++
 Contribution from
operations: +
 Free cash flow: ++
2014 Results
47
New Products, Business Model and
Geographies in Fast Growing Markets
Mission /
Awareness
FastGrowing
Markets
Innovation
Interconnected
Business
Model
Online
Strategic objectives
Business interconnections
Consumer
Marketing
Sun
Value creation
 Kodak and Nikon in
Brazil
 Revenue to more than
double from €1.3bn to
€2.8bn by 2018
 New territories
 Accelerate like-for-like
growth by leveraging all
businesses
 Bolon in China
 Sun & Readers as door
openers
 Online sales in Asia and
Latin America
 Revenue: +++
 Contribution from
operations: =/+
 Free cash flow: =/+
2014 Results
48
China: A Compelling Example
of How to Leverage All our Businesses
Mission /
Awareness
FastGrowing
Markets
Innovation
Interconnected
Business
Model
Online
Consumer
Marketing
Sun
SUNGLASSES
PRESCRIPTION LENSES
Highly underpenetrated sunwear industry
Representing over 20% of
global volumes and growing
at 10% p.a.
 Innovation for 800m myopes
 Biggest senior segment with
5% growth p.a.
 Vision under-developed in Tier
3-4-5 cities
 Chinese consumer driven by
social media
 Strong partnership networks
 Ensuring strong growth for Bolon in all
geographies, especially in Tier 1 cities
 Expansion in duty free
 Reinforcing Essilor sunwear portfolio with
Prosun acquisition
ONLINE
World’s largest e-commerce industry
 Essilor doubling online sunwear sales in
2014
 Our Next Billion Sales Country
 Revenue Growth >20% / Contribution from operations >20% of revenue
Source: Essilor, Official China census statistics
2014 Results
49
Corporate Mission: Improving Awareness
of the World’s Leading Handicap
Mission /
Awareness
FastGrowing
Markets
Innovation
Interconnected
Business
Model
Online
Consumer
Marketing
Sun
Inclusive Business, Advocacy and
Community Impact
 New wearers as a result of Corporate
Mission initiatives
o 500,000 so far
o More than 1 million targeted in 2015
o New initiatives in China, Mexico, etc.
 Driving global awareness
o Essilor Vision Foundation expansion:
300,000 people screened in 2014
o Vision Impact Institute launched in China
 €30m ‘Vision for Life’ strategic giving
program
2014 Results
50
Corporate Mission: Developing Business
Models to Unlock Last-mile Distribution
Mission /
Awareness
FastGrowing
Markets
Interconnected
Business
Model
Online
Targeting the New Vision
Generation of 2.5 billion people
Innovation
Consumer
Marketing
Sun
Optical retail stores
per 100,000 inhabitants
15.2
7.6
3.4
1.8
 350 EyeMitra points of sale so far
 10,000 EyeMitra professionals to be trained by 2020
Africa
Middle East
Asia
Latin
America
North
America
 Public-Private partnerships in place
2014 Results
51
Improving Lives
by Improving Sight
Agenda
Introduction
2014 Results
Strategy
Online Business
Sun Business
Outlook
2014 Results
53
The Online Optical Industry is on a Fast Track…
Global online optical retail* (in € billions)
As a percentage of the total optical retail industry
+14%
2013-2018e
CAGR
+13%
5.8
10-15%
2008-2013
CAGR
1.6
1.7
2.0
2.4
2.7
3.0
6%
c.4%
c.2%
2008
2009
2010
2011
2012
2013
2018e
2025e
* Includes online pure players and click & mortars / for spectacles, contact lenses and sunglasses
Source: Estin & Co 2013 estimates and analysis; Essilor International
2014 Results
54
… At the Dawn of a Sharp Acceleration
Close to the point where other consumer
sectors have tipped
Global online optical potential is high
E-commerce share by category over time (%)
Online optical retail* as a percentage of total optical retail
industry (in value)
25
20
c.5%
2025
North
America
10-15%
(2014)
2014
>4%
11–23%
15
10
5
0–3%
China
(2014)
Tipping points
close to 5%
c.8%
* Includes online pure players and click & mortars / for spectacles, contact
lenses and sunglasses.
Source: Estin & Co 2014 estimates and analysis; Essilor International
0
2000
2002
2004
2006
2008
2010
2012
Footwear
Sporting goods
Small appliances
Toys
Flowers
Office products
Auto parts
Tipping point
Source: Forrester data; Press search; BCG analysis
2014 Results
55
Compelling Online Growth Levers
 Focusing on fast-growing myope consumer segment
 Reaching consumers faster in emerging markets
 Complementing distribution through our customers’ stores
 Convenience leading to higher volume, enhancing value
2014 Results
56
Online Distribution Fostering
Volume and Value Growth
Volume
Value
Equipment per consumer per year
$ per consumer per year
Base 100 = Market Average*
Base
average
Base100
100 == Market
Market Average
275
420
300
139
100
100
Market
Average
Market
Average
US market : Frames + single vision lenses
* Market average = 0.5 items of equipment per consumer per year
2014 Results
57
Key Essilor Assets
to Differentiate itself in Online Distribution
 The best global supply chain for
lenses, frames and contact lenses
 Widest assortment of lenses,
sunglasses and optical frames
 Essilor brands
 Customer relationships for
digital/physical convergence
 Cumulative experience and scale
effect of the online optical leader
 Global and local optical consumer
insights
2014 Results
58
Buoyant Results Recorded by our Long-Standing
Websites in 2014…
2014 sales growth(1) : 31%
2014 Contribution from operations(2) up 65%
(3)
(1) EyeBuyDirect and FramesDirect combined
(2) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment.
(3) EyeBuyDirect and FramesDirect combined / Before Purchase Price Allocation
2014 Results
59
… Driven by Efficient Marketing Initiatives
and Technology Advances
October’s
“Buy One Get One”
Promotion
Responsive
design
implemented
in February
2014
Sales conversion on
mobile devices
surged 80%
Biggest month
of the year for
EyeBuyDirect:
+20% of site
visitors vs.
previous month
2014 Results
60
Capturing Online Potential in China Sunwear
 Own sites and own stores on major Chinese B2C platforms (Tmall, JD, Jumei, etc.)
 Year-round buzzes and promotions in online stores and social network platforms
Internet sales doubled to 10% of our Chinese sunwear sales in 2014
2014 Results
61
Accelerate Coastal Growth
and Gain Market Share
Supply Chain
 Optical lab in China for
global supply
 Essilor laboratory in
Thailand for European
supply
 Essilor distribution center
in the US for contact
lenses distribution
 In-group sourcing
Marketing
 Data driven reallocation
of marketing activities
Business development
 Dedicated team for
Chinese expansion
 Multi-country expansion
 Contact Lenses reorder
application
 Opportunistic bolt-on
acquisitions
 Responsive user
experience website
 Launch service solution
for Eye Care
Professionals
 Transitions, Kodak and
Polaroid branded lenses
 Unprofitable store
divestitures
2014 Results
62
A Clear Action Plan to Achieve our Ambition by 2018
2018
2015
2014





 Online revenue: €400-500m
 Contribution from operations : 10-12%
(1)
Leverage scale and supply chain
Consumer marketing
Online solutions for customers
International expansion
Robust growth and positive contribution from operations
 Coastal turnaround / Synergy programs
 Strong team in place, foundation for growth
 Losses narrowed
(1) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment / as a % of revenue.
2014 Results
63
Agenda
Introduction
2014 Results
Strategy
Online Business
Sun Business
Outlook
2014 Results
64
2014 Results
65
Sharp Revenue Growth in 2014: up 33%*
Estimated* revenue in € millions
Sunlenses (prescription & plano)
+6%*
 Strong like-for-like growth in polarized
prescription lenses
o Media consumer driving Xperio’s growth
2014
 Polycore integration
c.690
+79%
Sunglasses
 Bolon >20% like-for-like growth
2013
 Costa >15% like-for-like growth
c.520
 FGX
o USA: drugstore inventory drawdown
o Rest of the world >10% like-for-like growth
Rebalancing our sunwear portfolio
towards faster growth segments:
 USA Premium market
 China
* Prescription sunlens revenues are estimates based on extrapolated data from laboratory reporting systems
Revenue growth include acquisitions
2014 Results
66
2014: Successful Integration of our Acquisitions
 In-sourcing of prescription design and coatings
 Expansion in North East of the USA (H2 2014)
 In-sourcing of sunlenses
 Portfolio reinforcement with Prosun
 Launch of a prescription program, effective in H1 2015
 Strengthening of our manufacturing capabilities
 Widening our plano sunlenses’ range
2014 Results
67
2014: Reinforcing our Ability to Set
New Sunlens Quality Standards
Plano sunlens
innovation
Prescription
sunlens innovation





Xperio Gradient
Polaroid range
Online education
New mirror technologies
by Satisloh
Improved anti-scratch
process
Comprehensive
material offer:




CR39
Polycarbonate
Trivex
“Made in Italy”
2014 Results
68
Continuing to Grow our Sunwear Business in 2015
Acquisitions &
partnerships
Luxury
fashion
Performance
Innovation
Entry/mid-tier
Sunwear
Geographic &
channel
expansion
Brand equity
2014 Results
69
Innovation to Remain the Core Growth Driver
Innovation
Improving lens
performance
Brand equity
New iconic styles
Expansion
Acquisitions
Creative promotions & POS
innovation to boost purchases
2014 Results
70
From a Very Basic Sunlens…
FRONT
SURFACE
SCRATCH-RESISTANCE
4 LAYERS
TINT
SCRATCH-RESISTANCE
LENS
BACK
SURFACE
2014 Results
71
…to a More Advanced Solution…
FRONT
SURFACE
SCRATCH-RESISTANCE
6 LAYERS
SMUDGE REPELLENCE
SMUDGE REPELLENCE
TINT
SCRATCH-RESISTANCE
LENS
BACK
SURFACE
2014 Results
72
…and on to the Ultimate Essilor Sunlens Technology
FRONT
SURFACE
UP TO
25 LAYERS
SCRATCH-RESISTANCE
AR EFFICIENCY
(E-SPF protection included)
DUST REPELLENCE
SMUDGE & WATER
REPELLENCE
OR FOG REPELLENCE
SMUDGE & WATER
REPELLENCE
OR FOG REPELLENCE
MIROR
DUST REPELLENCE
AR EFFICIENCY
(harmful BLUE-VIOLET LIGHT protection included)
TINT OR POLARIZING FILTER
SCRATCH-RESISTANCE
HIGH INDEX LENS
BACK
SURFACE
2014 Results
73
Prosun, a New Brand to Reinforce
our Chinese Leadership
Innovation
A vibrant brand
with strong awareness
Brand equity
A unique kids offering
Expansion
Acquisitions
Strengthening
our male sunwear range
60%
brand awareness
in China
FengShaoFeng, Movie & TV actor
2014 Results
74
Reinforcing the Equity of our Core Brands
Innovation
New ambassador…
Kenny Chesney, Country singer
… & university partnership
Brand equity
Expansion
Creating Foster Grant
Signature for trade-up
Acquisitions
Leveraging celebrities and PR
Sonakshi Sinha, Top Bollywood actress
HuangXiaoMing, Movie & TV actor
YangMi, Movie & TV actress
2014 Results
75
: an Iconic Brand
Innovation
Brand equity
Expansion
Acquisitions
2014 Results
76
Sophie Marceau, New Ambassador for
Innovation
Brand equity
Expansion
Acquisitions
2014 Results
77
Geographic and Channel Expansion
Innovation
Travel retail
Brand equity
Expansion
Leveraging on-line distribution
Acquisitions
Operations in new territories
DFS store in Asia
Relay store in an
airport in the
Czech Republic
2014 Results
78
Acquisitions and Partnerships to Increase Growth
Innovation
Brand equity
Expansion
Commercial Partnerships
New Acquisitions
Retail
sell-out price
Acquisitions
Retail
sell-out price
Luxury fashion
c. 12m units
Performance
Luxury fashion
25-30m units
c. 12m units
Performance
25-30m units
….
Entry/mid-tier
Entry/mid-tier
>500m units
>500m units
“INFORMAL TRADE”
“INFORMAL TRADE”
Functional use


Reinforcing our brand portfolio
Strengthening our geographic coverage
 Asia
 Latin America
 Europe
Functional use



Serving the luxury, fashion
and performance segments with:
 Prescription
 Technology
 Supply chain
Joint-development
Turnkey solutions concept
2014 Results
79
A Strong €1.1bn Sun Business by 2018
Estimated* revenue in € millions
2018
1,100
2015
>760
2014
 Like-for-like revenue growth: c.7%
2013
c.520
c.690
 Total revenue growth with acquisitions: >10%
 Contribution from operations : in the high teens
(1)
* Prescription sunlens revenues are estimates based on extrapolated data from laboratory reporting systems
(1) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment / as a % of revenue.
2014 Results
80
Agenda
Introduction
2014 Results
Strategy
Online Business
Sun Business
Outlook
2014 Results
81
Outlook for 2015
 Revenue Growth:
 Like-for-like

 Excluding currency effect
 8% to 11%
(3)
 Adjusted contribution from operations
(1)
> 4.5%
(2)

≥ 18.8%
(3)
as a percentage of revenue
(1) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical and Coastal.com)
(2) Contribution from operations = Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment
(3) Before any new strategic acquisitions
2014 Results
83
Appendices
Adjusted P&L
 The reported results include various non-recurring items linked
primarily to the acquisition of Transitions Optical, Coastal.com, Costa
and Xiamen Yarui Optical. Most of these items represent technical
accounting entries with no impact on cash.
 The Company is publishing adjusted results which better reflect its
underlying operating performance.
 The reported financial statements and the reconciliation of reported to
adjusted financial statements are presented in the following pages.
2014 Results
85
Reported 2014 P&L
In € millions
Revenue
2013
Reported
2014
Reported
5,065
5,670
% Change
+12.0%
Gross profit
2,838
3,315
% of revenue
56.0%
58.5%
917
1,043
18.1%
18.4%
Operating profit
843
1,222
Net profit
646
986
Profit attributable to equity holders
593
929
11.7%
16.4%
2.82
4.41
Contribution from operations(2)
% of revenue
% of revenue
Earnings per share (in €)
(1) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment.
2014 Results
86
From Reported to Adjusted 2014 P&L
(1)
In € millions
2014
Reported
Non-recurring
items
Incl. Transitions & Coastal.com
Revenue
5,670
-
5,670
Gross profit
3,315
(13)
3,328
% of revenue
58.5%
Contribution from operations
(2)
% of revenue
Other income (expense), net
1,043
2014 Adjusted(1)
58.7%
(15)
18.4%
1,057
18.6%
179
247
(68)
1,222
232
989
Net profit
986
284
702
Profit attributable to equity holders
929
288
642
Operating profit
% of revenue
Earnings per share (in €)
16.4%
4.41
11.3%
1.37
3.05
(1) Adjusted for non-recurring items related mainly to the Transitions Optical, Coastal.com and Costa acquisitions in 2014 and to the Xiamen Yarui
Optical (Bolon) acquisition in 2013. Non-recurring items primarily include the €544-million gain recognized on the full-consolidation of Transitions
Optical, in application of IFRS 3 (revised), offset by (i) €118 million in impairment losses on property, plant and equipment, intangible assets and
goodwill, (ii) €28 million in technical expense adjustments arising from the full-consolidation of Transitions Optical, (iii) €17 million in acquisitions
costs, (iv) €54 million in restructuring costs arising from plans to unleash acquisition-related synergies, (v) €50 million in contingent consideration
payments and adjustments to other provisions for contingencies, and (vi) the €30-million contribution to the Vision for LifeTM programme.
(2) Operating profit before compensation costs for share-based payment plans, restructuring costs, other income and expenses, and goodwill
impairment. Adjusted in 2014 for €15 million, of which €13 million step-up on inventories stemming from major acquisitions (Transitions Optical,
Costa and Xiamen Yarui Optical)
2014 Results
87