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 |
- 248.6 -54.0%
- 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