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First-Half 2016 Results July 29, 2016 1. First-Half 2016 Highlights Hubert Sagnières – Chairman and Chief Executive Officer First-Half 2016 Results 2 Key Figures H1 2015 Revenue Contribution from operations(2) €3,408m €651m As a percentage of revenue 19.1% Earnings per share €1.83 Free Cash Flow(3) €226m H1 2016 Growth +5.1% +8.1% +4.0% (1) €3,583m €677m 18.9% +6.4% €1.95 +9.3% €247m (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 First-Half 2016 Results 1. First-Half 2016 Highlights 3 Key Highlights (1) Combined growth 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 (3) 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) First-Half 2016 Results 1. First-Half 2016 Highlights 4 2. Financial and Operating Performance Laurent Vacherot – Chief Operating Officer First-Half 2016 Results 5 First-Half 2016 Revenue up 8.1% Excluding the Currency Effect € millions 138 (102) -3.0% +4.0% 139 3,583 +5.1% +4.1% 3,408 H1 2015 Revenue (1) +8.1% Like-for-like growth Bolt-on acquisitions(1) Currency effect H1 2016 Revenue Local acquisitions or partnerships First-Half 2016 Results 2. Financial and Operating Performance 6 First-Half 2016 Revenue by Region and Division Change H1 2015 H1 2016 Change (reported) (excluding currency effect) 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% 362 360 -0.6% +0.9% 92 94 +2.3% +3.2% 3,408 3,583 +5.1% +8.1% Reported revenue in € millions Lenses & Optical Instruments Sunglasses & Readers Equipment TOTAL First-Half 2016 Results 2. Financial and Operating Performance 7 Second-Quarter Like-for-like Revenue up 3.2% Second-Quarter Combined Revenue up 6.9% (1) Lenses & Optical Instruments (2) Q1 2016 Q2 2016 H1 2016 +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% Lik e-for-lik e revenue growth Lenses & Optical Instruments (1) (2) Fast-growing markets 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% Combined growth = like-for-like growth + bolt-on acquisitions (local acquisitions or partnerships) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America First-Half 2016 Results 2. Financial and Operating Performance 8 Solid Momentum in Lenses & Optical Instruments +5.1% +5.0% +5.0% H2 H1 +4.7% +3.6% +2.4% +1.3% H1 H2 2013 H1 H2 2014 First-Half 2016 Results H1 2015 2016 2. Financial and Operating Performance 9 11 Acquisitions as of July 29, 2016 Representing ~€130m in Full-Year Revenue North America 5 Europe 1 Axis Medical Group Vision Direct Opti-Port US Optical Allaboutvision.com Icare Industries Asia/Pacific/ Middle East/Africa 1 Ocutec Laboratorio Summer Vision Opticas Place Vendôme One Vision Optical First-Half 2016 Results Latin America 4 Digital Lab 2. Financial and Operating Performance 10 North America: Healthy Lens Business, Poor Sun Season H1 2016 revenue growth excluding currency effect, across all business divisions 5.1% LENSES & OPTICAL INSTRUMENTS SUNGLASSES & READERS 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 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 Market share gain at Costa® New channels for FGX First-Half 2016 Results 2. Financial and Operating Performance 11 Europe: Sustained Dynamic H1 2016 revenue growth excluding currency effect, across all business divisions 7.8% LENSES & OPTICAL INSTRUMENTS HIGHLIGHTS Good performance in major countries, Russia and Eastern Europe Sales acceleration in Nordic countries UK and Central Europe stable 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 SUNGLASSES & READERS Launch of Costa® in France and Spain First-Half 2016 Results 2. Financial and Operating Performance 12 Asia : Continuing Momentum in Lenses (1) H1 2016 revenue growth excluding currency effect, across all business divisions FGM: 10.3% Total Asia: 8.8% LENSES & OPTICAL INSTRUMENTS SUNGLASSES & READERS HIGHLIGHTS Robust growth in India and Africa Good performance in Southeast Asia Implementation of new shipment model at Xiamen Yarui Optical (Bolon™) 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 Rebound at Xiamen Yarui Optical expected in H2 Good performance of Merve in Turkey (1) Asia/Pacific/Middle East/Africa First-Half 2016 Results 2. Financial and Operating Performance 13 Latin America: Sales Acceleration Driven By Organic Growth and Acquisitions H1 2016 revenue growth excluding currency effect, across all business divisions 30.8% LENSES & OPTICAL INSTRUMENTS EQUIPMENT 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 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™) Recovery driven by the adoption of the digital surfacing technology by small and mid-size labs First-Half 2016 Results 2. Financial and Operating Performance 14 Profit Attributable to Equity Holders up 7.3% € millions H1 2015 H1 2016 Change 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) - (172) (159) - 29.0% 26.1% - Net profit 422 450 Minority interests (34) (34) - Profit attributable to equity holders 388 416 +7.3% Earnings per share (in €) 1.83 1.95 +6.4% Income tax Effective tax rate +6.7% Rise in US interest rates Gain on FX in H1 2015 Partial script dividend Geographic mix (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) First-Half 2016 Results 2. Financial and Operating Performance 15 (1) Contribution from Operations up 4% € millions H1 2015 H1 2016 Change Revenue 3,408 3,583 +5.1% Gross profit 2,041 2,135 +4.6% % of revenue 59.9% 59.6% 835 866 24.5% 24.2% 651 677 19.1% 18.9% EBITDA % of revenue Contribution from operations (1) % of revenue +3.8% +4.0% Efficiency gains Transitions Optical sales to other lens casters Acquisitions Incremental media spend (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) First-Half 2016 Results 2. Financial and Operating Performance 16 Contribution from Operations at 18.9% of Revenue (1) Contribution from operations as a percentage of revenue 0.5% -0.2% -0.5% Trade up/Innovation Efficiency gains 19.1% 18.9% Bolon performance Preparing the future: FGM, 2.5 NVG, … H1 2015 (1) (2) Operating lev era ge and synergies Increm ental media spend Acquisitions(2) H1 2016 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) Bolt-on acquisitions (local acquisitions or partnerships) First-Half 2016 Results 2. Financial and Operating Performance 17 Capital Expenditure: Continuing to Invest in Long-term Growth 7% 6% 5% 285 192 232 321 5.6% 227 4% 4.6% 4.8% 4.7% 129 4% 3.6% 3% 2% 2011 2012 2013 2014 Capital expenditure in € million (net of disposals) First-Half 2016 Results 2015 H1 2016 As a percentage of revenue 2. Financial and Operating Performance 18 Free Cash Flow up at €247m, up 9.3% (1) € millions Operating cash flow (2) (excl. change in WCR) 625 233 Change in WCR 145 Capital expenditure 103 Dividends(4) 293 Net financial investments +247 (1) (2) (3) (4) Reported change in net debt 83 Foreign exchange, (3) capital increase and others 66 Free cash flow corresponds to net cash from operating activities less change in WCR and capital expenditure After disbursement of the fine to the Bundeskartellamt (BKA) that was set aside in 2010, for a total amount of €63m, including accrued interest Including €38m of foreign exchange impact and €3m of capital increase 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. First-Half 2016 Results 2. Financial and Operating Performance 19 Net Debt as of June 30, 2016: 1.3x EBITDA 2,172 2,168 2,089 1.4 1.3 (1) Strong cash generation Working capital usual seasonality Disbursement of the fine to the BKA 1.3 Acquisitions An active first-half Earn-out & put options H1 2015 2015 Net de bt H1 2016 Net de bt/EBITDA (1) For the last 12 months ended June 30, 2016 First-Half 2016 Results 2. Financial and Operating Performance 20 H2 2016 at a Glance Lenses & Optical Instruments Sunglasses & Readers Group-wide Continued momentum in fast-growing markets New initiatives for Transitions® lenses Eyezen™ and Eye Protect System™ product ranges Acceleration in online sales New channels/countries for Costa®, FGX and Bolon™ products Xiamen Yarui Optical (Bolon™) back to growth in the course of H2 Good order book in the Equipment division Consumer branding across all businesses Solid acquisition pipeline Capital expenditures to sales: around 4% for FY16 First-Half 2016 Results 2. Financial and Operating Performance 21 3. Strategy and Outlook Hubert Sagnières – Chairman and Chief Executive Officer First-Half 2016 Results 22 A Powerful Growth Strategy FAST-GROWING MARKETS ONLINE PRESCRIPTION LENSES SUNGLASSES & READERS €12.7bn €10bn 3-4% 6-7% €5.8bn 10-12% €5.8bn 14% ~ €28.5bn 6-7% Innovation Consumer Focus and Branding Partnerships and Acquisitions Business Interconnections 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 First-Half 2016 Results 3. Strategy and Outlook 23 A Lot of Upside Left for Essilor PRESCRIPTION LENSES SUNGLASSES READERS ONLINE Market units Market units Market units Market value ~1,260 m lenses 610-650 m pairs 250-300 m pairs ~€4bn Essilor market share Essilor market share Essilor market share Essilor market share ~41% ~5% ~15% Total market share in units: ~15% ~25% Source: Essilor – 2015 estimates, Estin First-Half 2016 Results 3. Strategy and Outlook 24 Lenses & Optical Instruments: Many Robust Initiatives in H2 Deployment of Eyezen™ lenses Products Launch of Eye Protect System™ range of products Focus on Transitions® lenses North America: Deployment of product & service offerings to our doctor alliances Geographies Europe: Product mix improvement Fast-Growing Markets(1): Continued momentum Consumers Online: Acceleration in all geographies Consumer branding: Further benefits in H2 (1) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America First-Half 2016 Results 3. Strategy and Outlook 25 Sunwear: Xiamen Yarui Optical to Improve in H2 Powerful long-term success story Long-term >30% revenue CAGR since 2012 Increased capacity with a new plant New distribution channels: direct to ECPs, travel retail Mid-term Geographic expansion: Thailand, Malaysia, Vietnam and the Philippines Development of prescription lenses Short-term Gradual recovery in shipments Return to growth expected in the course of H2 First-Half 2016 Results 3. Strategy and Outlook 26 Sunwear: Many Upcoming Developments New viral campaign: Leafcutter Costa® Channel expansion: Travel retail, doctor alliances Geographic expansion: US and abroad FGX Collection renewal opportunities in several key accounts in H2 Osse™ / Mustang™ (Merve): In the like-for-like scope New Opportunities from July 1st, 2016 New contracts with performance and luxury brands validate our strategy First-Half 2016 Results 3. Strategy and Outlook 27 Online: Optimization of Business Model to Enhance Growth New consumer experience at Clearly™/Coastal™ Launch of EyeBuyDirect™ in new countries Organic Growth Product expansion at VisionDirect Cross-selling our sunwear brands on most websites Entering new geographies: India Acquisitions Strengthening geographic and product coverage New Technologies Gearing up for powerful technology enablers First-Half 2016 Results 3. Strategy and Outlook 28 Setting the Ground for Acceleration in Fast-Growing Markets (1) RUSSIA €2.8bn Revenue Ambition by 2018 Building brand equity Contact lenses CHINA TURKEY Merve Sun brands: Building momentum Pioneering online models Vision ambassadors New plant for Xiamen Yarui Optical (Bolon™) CHILE, COSTA RICA & NICARAGUA Integrated retail model ASEAN New Kodak® frames & lenses offering in Morocco 2.5 NVG and Charity active in 12 countries Pipeline of acquisitions INDIA AFRICA 2.5 NVG models Pipeline of acquisitions Entry in Sunwear Building online offering BRAZIL PERU New footprint New partnerships Branding Online models (1) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America First-Half 2016 Results 3. Strategy and Outlook 29 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 First-Half 2016 Results 3. Strategy and Outlook 30 Outlook: Long-Term Objectives Unchanged 2016 Revenue Growth Like-for-like Excluding currency effect 2016 Contribution from operations as a percentage of revenue 2018 Like-for-Like Growth (1)(2) Around 4.5% ≥18.8% >6% >8% (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. First-Half 2016 Results 3. Strategy and Outlook 31 Questions & Answers