H1 2020 RESULTS

July 31, 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

A POSITIVE START TO THE YEAR… ABRUPTLY INTERRUPTED IN MARCH BY THE COVID-19 PANDEMIC

Our immediate focus 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 initiative, 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 PERIOD OF UNPRECEDENTED CHALLENGES

Q2 2020 EXTRAORDINARY BUSINESS DRIVERS HEAVILY IMPACTING SALES AND ECONOMIC RESULTS

  • MASSIVE SHUTDOWN OF COMMERCIAL ACTIVITIES ACROSS THE WORLD IN APRIL, FOLLOWED BY VERY GRADUAL AND PATCHY RE-OPENINGS IN MAY, RESULTING IN:
    • a two-month sales decline of ca 75%
    • an unprecedented deleveraging of costs and negative impact on profits, notwithstanding extensive cost savings and contingency plan
  • INITIAL SALES RECOVERY IN JUNE, DOUBLING PREVIOUS MONTH'S BUSINESS AND SLOWING DOWN THE PACE OF DECLINE OVER LAST YEAR TO AROUND 35% (EXCL. THE ACQUISITIONS):
    • most of Europe up and running, with some clear market drivers
    • China accelerating pace of recovery initiated in April
    • North America still subdued in June, coming back in July
    • key emerging markets still suffering

3

OUR BUSINESS STRATEGY KEPT MOVING FORWARD

ACQUISITION OF

EFFECTIVE JUNE 1ST

  • a disruptive, digitally native eyewear brand
  • an advanced e-commerce business model, with unique digital and social media skills
  • a compelling price-to-value eyewear product offer, appealing to a broad range of consumers with a focus on Millennials and Generation Z
  • a rapidly growing and profitable business, accelerating Safilo's D2C capabilities and share of business

4

OUR BUSINESS STRATEGY KEPT MOVING FORWARD

THE GLOBAL PANDEMIC FURTHER ELEVATING THE IMPORTANCE OF THE DIGITAL BUSINESS

  • OUR ORGANIC ONLINE BUSINESS UP 31% IN H1, ACCELERATING TO +38% IN Q2, DRIVEN BY:
    • Smith North America e-commerce business
    • Internet pure player customers
    • Strong growth also in June as stores reopened
  • OUR TOTAL ONLINE BUSINESS, INCL. BLENDERS AND PRIVÉ REVAUX E-COM, DOUBLED IN H1,

representing 11% of the Group's total sales vs 4% in H1 2019

5

OUR BUSINESS STRATEGY KEPT MOVING FORWARD

NEW LICENSE AGREEMENT WITH FOR MAINLAND CHINA

  • Founded in Toronto in 1961, Ports was the first luxury fashion label to enter the Chinese market in the early 90s
  • Ports is a new business opportunity in Safilo's brands portfolio to work with a locally relevant brand, in a strategically relevant market like China

6

H1 2020 KEY ECONOMIC AND FINANCIAL HIGHLIGHTS

Q2 SALES DISRUPTION IMPAIRING ECONOMIC RESULTS. TIGHT CASH MANAGEMENT PROTECTING LIQUIDITY AND CONTAINING GROUP NET DEBT

in millions of Euro, % of sales, % change @CFX vs same periods of 2019

Q1 2020

Q2 2020

221.1114.5

NET SALES

-11.5%-53.7%

ADJUSTED1 EBITDA

5.8

-34.1

2.6% of sales

-29.8% of sales

H1 2020

335.6

-32.7%

-28.3

-8.4% of sales

GROUP NET DEBT

135.5

188.5

+60.7 vs Dec.19

+113.7 vs Dec.19

7

SALES AND ECONOMIC HIGHLIGHTS

8

NET SALES BY GEOGRAPHY

in millions of Euro and % change vs same periods of 2019

Q2 2020

114.5

NET SALES

-54.0%cur.FX

-53.7% const.FX

57.2

-52.8% const.FX

EUROPE

49.2% of net sales

H1 2020

335.6

-32.3%cur.FX

-32.7% const.FX

165.0

-32.9% const.FX

  • Wholesale2 -55.2% in Q2/-33.2% in H1
    • June turning slightly positive in 3Os business in Europe, thanks to sales rebound in Italy, France and Germany
    • Contemporary and mass-cool brands outperforming fashion luxury
    • Small-mediumtowns better than historical cities, outlets and shopping malls

9

NET SALES BY GEOGRAPHY

in millions of Euro and % change vs same periods of 2019

Q2 2020

H1 2020

114.5

335.6

NET SALES

-54.0%cur.FX

-32.3%cur.FX

-53.7% const.FX

-32.7% const.FX

44.1128.5

-46.1% const.FX

-26.0% const.FX

NORTH

AMERICA

38.3% of net sales

  • Organic business -65% in Q2/-38% in H1
    • Slower pace of re-openings and social disruptions on top;
    • Smith overperforming thanks to e-com +40% in Q2, plus sport shops restart
  • Privé Revaux and Blenders doubling their sales vs their respective prior year business. Privé enters European market through a new retail partnership with GrandVision

10

NET SALES BY GEOGRAPHY

in millions of Euro and % change vs same periods of 2019

NET SALES

ASIA PACIFIC

7.1% of net sales

REST of the

WORLD

5.5% of net sales

Q2 2020

114.5

-54.0%cur.FX

-53.7% const.FX

8.8

-65.5%const.FX

4.4

-74.3% const.FX

H1 2020

335.6

-32.3%cur.FX

-32.7% const.FX

23.7

-45.9% const.FX

18.4

-46.4% const.FX

  • Q2 lack of business in travel retail channel, ca 40% of the regional sales
  • Business in HK, Korea, Japan and South Asia still difficult
  • China turning slightly positive in Q2, down mid-single digits in H1. Australia up double-digit in June
  • Q2 Latin America sales ca -80% due to significant virus outbreaks in Brazil and Mexico
  • MEA countries patchy and volatile, reflecting persistency of new cases

11

ECONOMIC PERFORMANCE

MASSIVE REDUCTION IN SALES OVER-PROPORTIONATELY WEIGHED ON OUR INDUSTRIAL AND OPERATING COST STRUCTURE, NOTWITHSTANDING STRUCTURAL SAVINGS AND CONTINGENCY MEASURES FOR A TOTAL OF 28M IN H1:

  • contingency measures initiated in March, including the extensive use of applicable personnel relief programs in Italy and across the world
  • continued costs saving actions, in line with the Group Business Plan presented at the end of last year

12

INDUSTRIAL PERFORMANCE

in millions of Euro, % on sales, % and pps change vs same periods 2019

Q2 2020

H1 2020

39.2

-71.2%

148.6

-44.2%

34.2%

-20.5 pps

44.3%

-9.4 pps

GROSS PROFIT

& MARGIN

  • Sharp impact from volumes decline
  • +7m accruals for > obsolescence, product returns, orders cancellation and some fixed asset write offs
  • Ex D&A, gross margin -16.5 pps in Q2 and -8.0 pps in H1

13

OPERATING PERFORMANCE

in millions of Euro, % on sales, % and pps change vs same periods 2019

ADJUSTED1

EBITDA

& MARGIN

Q2 2020

H1 2020

-34.1

n.s.

-28.3

n.s.

-29.8%

-38.3 pps

-8.4%

-16.7 pps

  • Q2 SG&A costs -33.7% vs last year, incidence on sales (ex D&A) +21.5 pps:
    • Selling exp. -40.4%, driven by strong marketing plan adjustments, while guaranteed minima on royalties and marketing for licenses impacting negatively
    • G&A exp. -7.5%, impacted by ca +6M bad debts provision

D&A

ADJUSTED1

EBIT

& MARGIN

27.0 -3.4%

8.0% -2.5 pps

-55.2

n.s.

-16.5%

-19.2 pps

  • Incidence of adj. D&A +2.5 pps, affected by Q2 >operating amortization

14

NET RESULT

in millions of Euro, % on sales, % and pps change vs same period 2019

H1 2020

-63.7n.s.

-19.0% -20.7pps

ADJUSTED1

NET RESULT

  • Higher net financial charges mainly due to negative exchange rate differences and, to a lesser degree, to the higher average gross debt, partially counterbalanced by recognition of deferred tax assets

15

FINANCIAL HIGHLIGHTS

16

FREE CASH FLOW

in millions of Euro

CASH PROTECTION MANAGEMENT RESULTING IN A SLIGHTLY POSITIVE FREE CASH FLOW BEFORE ACQUISITIONS

H1 2019

H1 2020

CASH FLOW FROM OPERATING ACTIVITIES,

before change in WC

CHANGES IN WORKING CAPITAL

26.5

(39.3)

➢ NEGATIVE ECONOMIC PERFORMANCE

11.4

56.3

➢ POSITIVE WC MANAGEMENT:

• lower trade receivables

• tight control on inventories

• longer payment terms

OPERATING CAPEX

(15.8)

(9.3)

CASH PAYMENTS FOR THE PRINCIPAL PORTION

(11.7)

(5.3)

OF LEASE LIABILITIES IFRS 16

FREE CASH FLOW

10.4

2.5

BEFORE ACQUISITIONS

(111.7)

CASH FLOW FOR ACQUISITIONS

FREE CASH FLOW

10.4

(109.2)

  • LOWER ORGANIC CAPEX
  • NET CASH PAID TO ACQUIRE PRIVÉ REVAUX AND BLENDERS

17

GROUP NET DEBT AND CASH POSITION

in millions of Euro

GROUP NET DEBT SUBSTANTIALLY IN LINE WITH DECEMBER 2019, EXCLUDING THE IMPACT OF THE ACQUISITIONS

Dec.31, 2019 March 31, 2020 June 30, 2020

CASH

64.2

99.6

110.9

POSITION

NET DEBT

74.8

135.5

188.5

NET DEBT

27.8

31.4

27.0

pre IFRS 16 and

acquisitions

  • 150M TERM AND REVOLVING CREDIT FACILITY FULLY DRAWN IN MARCH
  • NEW TERM LOAN UNDER FINALIZATION:
    • subject to lending banks' and SACE credit approval over the coming weeks
    • Including a new set of covenants and the cancellation of the test at the end of June

18

BUSINESS UPDATE IN RELATION TO THE COVID-19 PANDEMIC

  • In July, preliminary net sales performance points to a business rebound, with total net sales expected to turn positive compared to the same month last year;
  • Business performance in North America, a clear driver of the monthly sales uplift, followed by a positive acceleration in Europe and Asia;
  • Looking at the third quarter, the Group's management remains vigilant about the reintroduction of localized lockdowns and the differing pace of the recovery across countries, estimating total net sales (incl. acquisitions) to decline moderately compared to the same period of last year;
  • 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.

19

Appendices

20

Notes to the presentation

1 In H1 2020, the adjusted economic results excludes non-recurring costs for Euro 13.2 million (Euro 10.3 million on EBITDA), due to restructuring expenses related to the ongoing cost saving program. In Q2 2020, the adjusted EBITDA excludes non-recurring costs for Euro 7.9 million.

In H1 2019, the adjusted economic results excluded: (i) the impairment of the entire goodwill allocated to the Group's cash generating units for Euro 227.1 million, (ii) non-recurring costs for Euro 5 million (Euro

3.8 million in Q2 2019) due to restructuring expenses related to the ongoing cost saving program, and (iii) a write-down of deferred tax assets of Euro 23.3 million.

2 The wholesale business excludes the business of the production agreement with Kering, reported within the geographical area of Europe.

21

Net Sales by geographic area

(Euro million)

H1 2020

%

H1 2019

%

% Change

% Change

at current forex at constant forex

Europe

165.0

49.2%

246.3

49.7%

-33.0%

-32.9%

North America

128.5

38.3%

169.5

34.2%

-24.2%

-26.0%

Asia Pacific

23.7

7.1%

43.5

8.8%

-45.4%

-45.9%

Rest of the world

18.4

5.5%

36.7

7.4%

-49.8%

-46.4%

Total

335.6

100.0%

495.9

100.0%

-32.3%

-32.7%

(Euro million)

Q2 2020

%

Q2 2019

%

% Change

% Change

at current forex at constant forex

Europe

57.2

50.0%

121.7

48.9%

-53.0%

-52.8%

North America

44.1

38.5%

80.6

32.4%

-45.3%

-46.1%

Asia Pacific

8.8

7.7%

25.7

10.3%

-65.7%

-65.5%

Rest of the world

4.4

3.8%

20.6

8.3%

-78.9%

-74.3%

Total

114.5

100.0%

248.6

100.0%

-54.0%

-53.7%

22

Economic highlights

(Euro in millions)

H1 2020

H1 2019

% Change

Net sales

335.6

495.9

-32.3%

Gross profit

148.6

266.2

-44.2%

% on net sales

44.3%

53.7%

EBITDA

(38.6)

36.3

n.s.

% on net sales

(11.5%)

7.3%

Adjusted1 EBITDA

(28.3)

41.2

n.s

% on net sales

(8.4%)

8.3%

Operating result

(68.4)

(218.8)

-68.7%

% on net sales

(20.4%)

(44.1%)

Adjusted1 operating result

(55.2)

13.3

n.s.

% on net sales

(16.5%)

2.7%

Group net result

(74.8)

(246.9)

-69.7%

% on net sales

(22.3%)

(49.8%)

Adjusted1 Group net result

(63.7)

8.5

n.s.

% on net sales

(19.0%)

1.7%

IFRS 16 impact on EBITDA

6.0

7.0

IFRS 16 impact on Operating result

0.8

0.4

IFRS 16 impact on Net result

(0.2)

(0.3)

Q2 2020

Q2 2019 % Change

  1. 248.6 -54.0%
  1. 135.9 -71.2%

34.2%54.7%

(42.0)

17.4

n.s.

(36.7%)

7.0%

(34.1)

21.2

n.s

(29.8%)

8.5%

3.03.6

23

Balance Sheet

June 30, 2020

December 31, 2019

Change

Net working capital

196.7

250.8

(54.2)

Tangible, Right of Use, and Intangible fixed assets

348.3

240.6

107.7

Goodwill

33.2

0.0

33.2

Non-current assets held for sale

5.5

5.5

0.0

Other assets/(liabilities), net

(187.9)

(80.1)

(107.8)

Net invested capital

395.7

416.8

(21.1)

Net financial position

(188.5)

(74.8)

(113.7)

Group Shareholders' equity

(162.8)

(342.1)

179.3

Non-controlling interests

(44.4)

0.1

(44.5)

24

Net Working Capital

June 30, 2020

June 30, 2019

Change

Trade receivables

150.3

199.5

(49.2)

Inventories

228.4

236.1

(7.7)

Trade payables

(182.1)

(178.3)

(3.8)

Net working capital

196.7

257.4

(60.7)

% on net sales

25.3%

25.9%

25

Free Cash Flow

(Euro in millions)

H1 2020

H1 2019

Cash flow from operating activities before changes in working capital

(39.3)

26.5

Changes in working capital

56.3

11.4

Cash flow from operating activities

17.0

37.9

Cash flow for investment activities

(9.3)

(15.8)

Cash payments for the principal portion of lease liabilities IFRS 16

(5.3)

(11.7)

Free Cash Flow (before acquisitions)

2.5

10.4

Cash Flow for acquisitions

(111.7)

-

Free Cash Flow

(109.2)

10.4

26

Exchange Rates

As of

(Appreciation)/

Average for

(Appreciation)/

Depreciation

Depreciation

Currency

Code

June 30,

December 31,

%

June 30,

June 30,

%

2020

2019

2020

2019

US Dollar

USD

1.1198

1.1234

-0.3%

1.1021

1.1298

-2.5%

Hong-Kong Dollar

HKD

8.6788

8.7473

-0.8%

8.5531

8.8611

-3.5%

Swiss Franc

CHF

1.0651

1.0854

-1.9%

1.0642

1.1295

-5.8%

Canadian Dollar

CAD

1.5324

1.4598

5.0%

1.5033

1.5069

-0.2%

Japanese Yen

YEN

120.6600

121.9400

-1.0%

119.2668

124.2836

-4.0%

British Pound

GBP

0.9124

0.8508

7.2%

0.8746

0.8736

0.1%

Swedish Krown

SEK

10.4948

10.4468

0.5%

10.6599

10.5181

1.3%

Australian Dollar

AUD

1.6344

1.5995

2.2%

1.6775

1.6003

4.8%

South-African Rand

ZAR

19.4425

15.7773

23.2%

18.3112

16.0434

14.1%

Russian Ruble

RUB

79.6300

69.9563

13.8%

76.6692

73.7444

4.0%

Brasilian Real

BRL

6.1118

4.5157

35.3%

5.4104

4.3417

24.6%

Indian Rupee

INR

84.6235

80.1870

5.5%

81.7046

79.1240

3.3%

Singapore Dollar

SGD

1.5648

1.5111

3.6%

1.5411

1.5356

0.4%

Malaysian Ringgit

MYR

4.7989

4.5953

4.4%

4.6836

4.6545

0.6%

Chinese Renminbi

CNY

7.9219

7.8205

1.3%

7.7509

7.6678

1.1%

Korean Won

KRW

1,345.8300

1,296.2800

3.8%

1,329.5321

1,295.1984

2.7%

Mexican Peso

MXN

25.9470

21.2202

22.3%

23.8430

21.6543

10.1%

Turkish Lira

TRY

7.6761

6.6843

14.8%

7.14925

6.35616

12.5%

Dirham UAE

AED

4.1125

4.1257

-0.3%

4.04727

4.14913

-2.5%

27

Brand Portfolio

28

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Disclaimer

Safilo Group S.p.A. published this content on 31 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 August 2020 09:28:03 UTC