Q1 2020 TRADING UPDATE
May 6, 2020
DISCLAIMER
This presentation may contain forward looking statements based on current expectations and projects of the Group in relation to future events. Due to their specific nature, these statements are subject to inherent risks and uncertainties, as they depend on certain circumstances and facts, most of which being beyond the control of the Group. Therefore actual results could differ, even to a significant extent, with respect to those reported in the statements.
1
A PERIOD OF UNPRECEDENTED CHALLENGES
In these extraordinary circumstances, we have been focused on:
PROTECTING THE HEALTH AND SAFETY OF ALL OUR PEOPLE
Immediate and rigorous implementation of all the safety and prevention regulations provided by government protocols
SUPPORTING OUR COMMUNITIES AND MEDICAL WORKERS INVOLVED IN THE COVID-19 EMERGENCY
#UNITED4EYECARE, our global corporate initiatives, supporting the fight against the Covid-19 epidemic
MAINTAINING BUSINESS CONTINUITY
Do everything possible to support our customers, ensuring seamless operations
PROTECTING CASH
Minimize all discretionary expenditures and investments, tight WC management
ACCELERATING ON THE KEY DRIVERS OF OUR GROUP BUSINESS PLAN
New programs, actions and tools to more effectively address the new business context
2
A POSITIVE START TO THE YEAR…
January and February up mid-single digit, driven by:
- the double-digit performance of Carrera, Polaroid, Smith and core licenses;
- the launch of our new partnerships - Beckham, Levi's and Missoni
3
…ABRUPTLY INTERRUPTED IN MARCH BY THE CORONAVIRUS PANDEMIC
After Italy, from mid-March, the spread of Covid-19 escalated across Europe and the USA, with the most severe measures of national lockdowns and halt of business heavily impacting the last two weeks of the month and the overall Q1 performance
Q1 2020 economic and financial highlights (post-IFRS 16)
in millions of Euro, % on sales, %/bps change vs Q1 2019
221.1 | |
NET SALES | -11.5% const.FX |
-10.8% wholesale1 | |
5.8
ADJUSTED2 EBITDA
2.6% of net sales -550bps
135.5
GROUP NET DEBT | +60.7m vs Dec.19 | |
fully driven by M&A | 4 | |
ECONOMIC AND FINANCIAL HIGHLIGHTS (post-IFRS16)
5
NET SALES
in millions of Euro and % change vs Q1 2019
Q1 2019 | Q1 2020 |
247.3 | 221.1 |
NET SALES | -10.6%cur.FX |
-11.5% const.FX |
- Drop of volumes, while price/mix and forex slightly positive
- Wholesale business1 -10.8%
- Own core brands -3.4%
- Online business up +25%
- Tommy Hilfiger, Hugo Boss and Jimmy Choo relative outperformers among licenses
- Deceleration of Dior in line with forecasts
- Acquisition of Privé Revaux contributing 5.5m to the quarter
6
NET SALES BY GEOGRAPHY
in millions of Euro and % change vs Q1 2019
EUROPE
48.7% of net sales
NORTH
AMERICA
38.2% of net sales
Q1 2020
107.7
-13.5% cur.FX &
const.FX
84.4
-5.1%cur.FX
-7.8% const.FX
- Wholesale business1 -12.2%;
- Italy, Spain and France, first markets to suffer the health emergency and stop of business activities;
- Sales in Germany, North Europe and East Europe less impacted, driven by Hugo Boss, Tommy Hilfiger and Polaroid;
- Lockdowns to curb the pandemic significantly choking business from mid-March;
- US brands and fashion luxury suffering the most;
- Acquisition of Privé Revaux;
- Smith up 3.5% at const.FX, thanks to strong winter season and online.
7
NET SALES BY GEOGRAPHY
in millions of Euro and % change vs Q1 2019
Q1 2020
ASIA PACIFIC
6.7% of net sales | 14.9 |
-15.9%cur.FX
-17.5% const.FX
REST of the
WORLD14.1
6.4% of net sales
-12.5%cur.FX
-10.5% const.FX
- Halt of tourism and early shut down of stores impacted travel retail channel, business to chains and fashion house boutiques;
- Sales to independent stores in China, relatively more resilient.
- Weak performance of Latin America driven by Brazil;
- Mexico regained speed after deceleration in Q4 2019;
- IMEA markets back to a positive sales performance.
8
GROSS PROFIT
Inefficient supply chain dynamics due to production interruptions and sourcing activities in China
in millions of Euro, % on sales, %/bps change vs Q1 2019
Q1 2019 | Q1 2020 |
GROSS PROFIT | 130.2 | 109.4 |
52.7% | 49.5% | |
& MARGIN | ||
-16.0% | ||
-320bps |
- Subdued factory results on lower production volumes and supply chain disruption;
- Obsolescence provision increased at the end of March;
- Favourable mix effect due to lower weight of Kering supply business
9
ADJUSTED2 EBITDA (post-IFRS 16)
Disproportionate contraction of Group operating performance due to operating deleverage
in millions of Euro, % on sales, %/bps change vs Q1 2019
Q1 2019 | Q1 2020 |
ADJUSTED220.05.8
EBITDA | 8.1% | 2.6% |
-70.8% | ||
& MARGIN | ||
-550bps |
- Strong operating deleverage in March as one of the highest months for sales and marketing and selling expenses;
- Overheads savings continued during the quarter
10
GROUP NET DEBT (post-IFRS16)
Higher Group Net Debt reflecting acquisition of Privé Revaux in February 2020
in millions of Euro
Mar.31, 2019 Dec.31, 2019 March 31, 2020
GROUP | |||
NET DEBT | 105.7 | 74.8 | 135.5 |
& ADJUSTED2,3 | |||
LEVERAGE | 0.5x | 0.5x | 1.6x |
IFRS-16 impact | 79.3 | 47.0 | 45.5 |
- Weak economic results
- Strict WC management, with seasonal absorption lower than same period last year, following decrease in inventories
- Feb. 10, 2020 acquisition of Privè Revaux for 61.6m
- Net Debt in line with end of 2019, ex M&A
11
BUSINESS UPDATE IN RELATION TO THE COVID-19 PANDEMIC
- Further significant deceleration of business activity in April, reflecting the almost complete shutdown of the various distribution channels in which the Group sells its products. Online business the exception, together with the significant improvement of sales trends in China;
- Very gradual and patchy re-start of sector activities between May and June driving Safilo's expectation for a more significant net sales decline and negative operating results in Q2;
- Outlook for the full year 2020 still impossible to provide given the still high level of uncertainty surrounding the Covid-19 pandemic and the future recovery of economies worldwide.
12
#UNITED4EYECARE
13
14
Appendices
15
Notes to the presentation
- The wholesale business excludes Kering supply business, recorded within the geographical area of Europe.
- In Q1 2020, the adjusted EBITDA excludes non-recurring costs for Euro 2.4 million, due to restructuring expenses related to the ongoing cost saving program.
In Q1 2019, the adjusted EBITDA excluded non-recurring costs for Euro 1.1 million, due to restructuring expenses related to the ongoing cost saving program.
3. The adjusted financial leverage is calculated on pre-IFRS 16 Net Debt and excluding the Euro 30 million subordinated loan provided by Safilo's reference shareholder, Multibrands Italy B.V., controlled by HAL Holding N.V., for the acquisition of Privé Revaux.
16
Net Sales by geographic area
(Euro million) | Q1 2020 | % | Q1 2019 | % | % Change | % Change |
at current forex | at constant forex | |||||
Europe | 107.7 | 48.7% | 124.6 | 50.4% | -13.5% | -13.5% |
North America | 84.4 | 38.2% | 88.9 | 36.0% | -5.1% | -7.8% |
Asia Pacific | 14.9 | 6.7% | 17.7 | 7.2% | -15.9% | -17.5% |
Rest of the world | 14.1 | 6.4% | 16.1 | 6.5% | -12.5% | -10.5% |
Total | 221.1 | 100% | 247.3 | 100% | -10.6% | -11.5% |
17
Economic highlights
(Euro in millions) | Q1 2020 | Q1 2019 | % Change |
Net sales | 221.1 | 247.3 | -10.6% |
Gross profit | 109.4 | 130.2 | -16.0% |
% on net sales | 49.5% | 52.7% | |
EBITDA | 3.4 | 18.9 | -82.0% |
% on net sales | 1.5% | 7.6% | |
Adjusted2 EBITDA | 5.8 | 20.0 | -70.8% |
% on net sales | 2.6% | 8.1% | |
IFRS 16 impact on EBITDA | 3.1 | 3.4 |
18
Exchange Rates
As of | (Appreciation)/ | Average for | (Appreciation)/ | ||||
Depreciation | Depreciation | ||||||
Currency | Code | March 31, | December 31, | % | March 31, | March 31, | % |
2020 | 2019 | 2020 | 2019 | ||||
US Dollar | USD | 1.0956 | 1.1234 | -2.5% | 1.1027 | 1.1358 | -2.9% |
Hong-Kong Dollar | HKD | 8.4945 | 8.7473 | -2.9% | 8.5686 | 8.9116 | -3.8% |
Swiss Franc | CHF | 1.0585 | 1.0854 | -2.5% | 1.0668 | 1.1324 | -5.8% |
Canadian Dollar | CAD | 1.5617 | 1.4598 | 7.0% | 1.4819 | 1.5102 | -1.9% |
Japanese Yen | YEN | 118.9000 | 121.9400 | -2.5% | 120.0973 | 125.0835 | -4.0% |
British Pound | GBP | 0.8864 | 0.8508 | 4.2% | 0.8623 | 0.8725 | -1.2% |
Swedish Krown | SEK | 11.0613 | 10.4468 | 5.9% | 10.6689 | 10.4187 | 2.4% |
Australian Dollar | AUD | 1.7967 | 1.5995 | 12.3% | 1.6791 | 1.5944 | 5.3% |
South-African Rand | ZAR | 19.6095 | 15.7773 | 24.3% | 16.9479 | 15.9206 | 6.5% |
Russian Ruble | RUB | 85.9486 | 69.9563 | 22.9% | 73.8205 | 74.9094 | -1.5% |
Brasilian Real | BRL | 5.7001 | 4.5157 | 26.2% | 4.9167 | 4.2775 | 14.9% |
Indian Rupee | INR | 82.8985 | 80.1870 | 3.4% | 79.9096 | 80.0720 | -0.2% |
Singapore Dollar | SGD | 1.5633 | 1.5111 | 3.5% | 1.5281 | 1.5388 | -0.7% |
Malaysian Ringgit | MYR | 4.7330 | 4.5953 | 3.0% | 4.6094 | 4.6466 | -0.8% |
Chinese Renminbi | CNY | 7.7784 | 7.8205 | -0.5% | 7.6956 | 7.6635 | 0.4% |
Korean Won | KRW | 1,341.0300 | 1,296.2800 | 3.5% | 1,316.2813 | 1,278.5949 | 2.9% |
Mexican Peso | MXN | 26.1772 | 21.2202 | 23.4% | 22.0918 | 21.8057 | 1.3% |
Turkish Lira | TRY | 7.2063 | 6.6843 | 7.8% | 6.74284 | 6.11018 | 10.4% |
Dirham UAE | AED | 4.0236 | 4.1257 | -2.5% | 4.04952 | 4.17112 | -2.9% |
19
Brand Portfolio
**
- from 2021
- signed and communicated on December 8, 2019 and still to be closed at the present date
20
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Disclaimer
Safilo Group S.p.A. published this content on 06 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 May 2020 16:23:10 UTC