2018 pro
forma1
results
Solid growth,
sound profitability and cash flow
A robust foundation for EssilorLuxottica
PDF Version of the news release
-
Pro forma1
revenue: +3.2% at constant exchange rates3
-
Pro forma1
adjusted2 operating
profit: 15.9% of revenue
-
Pro forma1
adjusted2 net profit:
11.6% of revenue
-
Combined free cash
flow8: Euro 1.8
billion
-
Dividend recommendation: Euro
2.04 per share
-
Confirmation of Euro 420 to
Euro 600 million net synergy target at operating profit level
within five years
Charenton-le-Pont, France (March 8, 2019) - The Board
of Directors of EssilorLuxottica met on March 7, 2019 to approve
the financial statements for 2018. The 2018 IFRS consolidated
financial statements were audited by the Statutory Auditors whose
certification report is in the process of being issued. The Board
of Directors has also approved the unaudited pro forma1
consolidated financial information, which has been prepared for
illustrative purposes only.
"We are proud to
present strong Luxottica and Essilor combined results. The
contribution of Luxottica is significant: net sales, profitability
and free cash flow all show positive growth, excluding the exchange
rate effect. From a qualitative standpoint, its simplicity,
entrepreneurial spirit and speed of execution continued to pay off.
Today, Luxottica is well organized and energized for its future as
part of EssilorLuxottica. We come to the
integration process in the best possible way, bringing with us the
most beloved brands, excellent operations capabilities and a
digitized business inside and out. Our legacy will continue to grow
in this way for years to come. Once we are fully integrated with
Essilor and our synergies have taken effect, together we will
redefine a revolutionary service model for the benefit of wholesale
partners and consumers everywhere," commented Leonardo Del
Vecchio, Executive Chairman of EssilorLuxottica.
"Since
EssilorLuxottica was formed on October 1, 2018, it has fully
embraced its mission to help people see more, be more and live life
to its fullest. To reach this powerful goal, the Group can rely on
an outstanding performance from Essilor, which delivered strong
business growth at all its divisions in 2018 and surpassed its
growth targets for the year while continuing to work on numerous
innovations that will benefit the entire ophthalmic optics and
eyewear industries. These achievements reflect the vibrant culture
of entrepreneurship within Essilor and the creativity of its
employees, whose interests are fully aligned with those of
shareholders thanks to employee share ownership at every level of
the company. This powerful value creation model will facilitate the
generation of synergies going forward and will be rolled out across
the entire EssilorLuxottica Group," said Hubert Sagnières,
Executive Vice Chairman of EssilorLuxottica.
2018 pro
forma1
adjusted2 operating and
net income
In million of Euros |
2018 |
2017 |
Change % |
Revenue |
16,160 |
16,349 |
-1.2% |
Adjusted2 gross
profit |
10,172 |
10,314 |
-1.4% |
% of
revenue |
62.9% |
63.1% |
|
Adjusted2 operating
profit |
2,572 |
2,703 |
-4.8% |
% of
revenue |
15.9% |
16.5% |
|
Adjusted2 net
profit |
1,871 |
1,904 |
-1.7% |
% of
revenue |
11.6% |
11.6% |
|
EssilorLuxottica reported pro
forma1 revenues of
Euro 16,160 million, up 3.2% at constant exchange rates3. Essilor and
Luxottica both contributed to the positive performance. Business
improved across all regions, proof that the strategic initiatives
and growth projects are paying off. The pro forma1 gross
margin on an adjusted2 basis was
slightly down to 62.9%. The pro forma1 operating
profit on an adjusted2 basis reached
Euro 2,572 million in 2018, an increase of 1.2% at constant
exchange rates3. Pro
forma1
adjusted2 operating
margin ended the year at 15.9% almost flat at constant exchange
rates3. The pro
forma1 net profit on
an adjusted2 basis was
down by 1.7% to Euro 1,871 million. Adjusted2 net
margin held at 11.6%.
Net debt as of December 31, 2018 was Euro 1.9 billion, a testament
to the Group's ability to generate significant cash flow.
2018 pro
forma1 revenue by
operating segment
In millions of Euros |
2018 |
2017 |
Change at constant rates3 |
Currency effect |
Change (reported) |
Lenses
& Optical Instr. (Essilor) |
6,283 |
6,257 |
+4.8% |
-4.4% |
+0.4% |
Sunglasses & Readers (Essilor) |
787 |
765 |
+7.6% |
-4.7% |
+2.9% |
Equipments (Essilor) |
210 |
199 |
+9.1% |
-3.8% |
+5.3% |
Wholesale
(Luxottica) |
3,145 |
3,315 |
-1.0% |
-4.1% |
-5.1% |
Retail
(Luxottica) |
5,735 |
5,813 |
+3.0% |
-4.4% |
-1.4% |
Total |
16,160 |
16,349 |
+3.2% |
-4.4% |
-1.2% |
2018 pro
forma1 revenue by
geographical area
In millions of Euros |
2018 |
2017 |
Change at constant rates3 |
Currency effect |
Change (reported) |
North
America |
8,400 |
8,556 |
+2.6% |
-4.4% |
-1.8% |
Europe |
4,040 |
4,063 |
+1.3% |
-1.9% |
-0.6% |
Asia,
Oceania and Africa |
2,691 |
2,638 |
+6.6% |
-4.6% |
+2.0% |
Latin
America |
1,028 |
1,092 |
+.6.5% |
-12.4% |
-5.9% |
Total |
16,160 |
16,349 |
+3.2% |
-4.4% |
-1.2% |
Essilor: 2018
results and highlights
Essilor forged ahead with its mission to "improve lives by
improving sight" in 2018 while pursuing a growth strategy focused
on three key drivers: product and service innovation across all
ranges; geographic expansion and multi-channel distribution through
eyecare professionals, directly operated stores and online sales;
and a targeted acquisitions and partnerships policy.
Thanks to this strategy, sales
growth accelerated with each quarter in 2018. Revenue ended the
year at Euro 7,459 million, up 4.6% from the previous year on
a like-for-like4 basis,
including 5.7% in the fourth quarter. This was well above the
initial target of delivering like-for-like4 growth of
around 4%. The additional growth allowed the company to continue to
invest for the future, for instance in very promising projects in
the areas of myopia and digitalization, and to bolster initiatives
relating to Essilor's mission and its "2.5 New Vision
Generation(TM)" activities.
Other highlights of the year
included:
-
Dynamic growth at the Lenses & Optical
Instruments division, where revenue rose 4.2%
like-for-like4, notably
thanks to the momentum of new products in the
Transitions®,
Varilux® and
Eyezen(TM) ranges
-
A sharp acceleration in sales growth for
Sunglasses & Readers, where revenue surged 8.1%
like-for-like4. This good
result notably reflected strong growth in China, fueled by Xiamen
Yarui Optical (Bolon(TM)) and the MJS stores, and in the United
States, where the Costa® brand powered
ahead
-
Double-digit growth in online sales with
particularly good performances in India as well as in corrective
lenses and mid-tier products, illustrating Essilor's ability to
identify the most promising segments year after year
-
Revenue growth at constant exchange
rates3 of more than
10% in fast-growing countries5, which now
account for a quarter of Essilor's total revenue
-
A gradual resumption of the acquisitions and
partnerships policy with the completion of eight transactions
representing full-year revenue of close to Euro 68 million
-
A healthy financial position that allowed the
company to substantially reduce its net debt
Gross margin expanded from 58.2%
to 58.6%, as gross profit reached Euro 4,372 million. It was
boosted by efficiency gains, by a favorable trend in the product
mix, particularly thanks to solid growth in sales of
Transitions®,
Varilux®,
Crizal® and
Eyezen(TM) lenses, and by new products, including the launch of the
Crizal® Sapphire
360°(TM) antireflective lens and the completion of the
Varilux® X Series(TM)
progressive lens rollout.
Adjusted² contribution from operations6, the
company's previous key performance indicator of profitability,
reached 18.1% of revenue even as investments in new and buoyant
segments were stepped up.
On a pro forma1 basis, the
adjusted2 operating
profit reached 16.5% of revenue.
The effective tax rate on an adjusted basis2
decreased by 90 basis points, to 21.6%, thanks to the elimination
of the tax on dividends and to a favorable geographic
mix.
Adjusted2 net profit
came to Euro 923 million compared with Euro 942 million in
2017.
Luxottica: 2018
results and highlights
2018 was another year of growth for Luxottica with consolidated
sales over Euro 8,929 million, up 1.5% at constant exchange
rates3 (-2.8% at
current exchange rates, due to currency headwinds driven by the
devaluation of the US and Australian dollars and the Brazilian
Real). The second half of the year showed an acceleration in sales
growth compared to the first six months of the year, helped by a
progressive improvement in wholesale's performance in Europe.
Both Luxottica's divisions
contributed to the positive sales performance of the year, with the
Wholesale segment showing a strong acceleration in the second part
of the year and Retail confirming solid growth.
In 2018, Luxottica revenues were driven by North America,
Asia-Pacific and Latin America. Europe reported sales down by 0.8%
at constant exchange rates3 due to a
tough comparison with 2017 where sales were up 13.4% at constant
exchange rates3, and with the
cumulative growth of the last three years which was 27% at constant
exchange rates3.
Once again, Ray-Ban led the performance in every segment and region
thanks to a strong global communication strategy and integrated
omnichannel brand management.
While Wholesale sales were Euro
3,194 million, down 1.1% at constant exchange rates3
(-5.2% at current exchange rates), they showed a sequential
improvement throughout the year, driven by solid growth in North
America, Japan and Korea. The Wholesale results in the first part
of the year were negatively impacted by the implementation of the
new commercial policies for European online operators and wholesale
customers, as well as the restructuring of the distribution network
in China. Wholesale sales, including sales in Europe, returned to
growth in the third quarter and accelerated to +3.4% at constant
exchange rates3 (+2% at
current exchange rates) in the last three months of the year,
confirming the value of the initiatives undertaken. Luxottica
continued its expansion of direct distribution with the opening of
new wholesale subsidiaries in the Middle East in 2018 and in Taiwan
in early 2019.
In 2018, the Retail division grew
by 3% at constant exchange rates3 (-1.4% at
current exchange rates), primarily fueled by Sunglass Hut, the
optical retail business in Australia, Target Optical and the
e-commerce platforms. The solid sales performance confirmed the
effectiveness of strategic initiatives aimed at improving the
operating model and the ability of the group's retail brands to
execute them, while offering an improved consumer experience.
Comparable store sales7 (which do not
include e-commerce sales) were up 0.5%, growing in all regions
excluding North America, where they were
flat.
Sunglass Hut's strong offering worldwide drove global sales up by
5.7% at constant exchange rates3 with a
positive contribution from all geographies. LensCrafters sales in
North America were in line with last year.
In 2018, sales from Luxottica's e-commerce platforms, representing
approximately 5% of total sales, were up 14% at constant exchange
rates3. Ray-Ban.com
confirmed it is the main driver of the group's online business.
Net profit for the fiscal year
2018 on an adjusted basis2 was down by
2.0% to Euro 951 million (+6.7% to over Euro one billion at
constant exchange rates3) due in part
to the tough comparison over last year's record level. In 2017, net
profit results benefited from non-recurring income related to
Luxottica's Italian Patent Box agreement covering 2015 and 2016 and
from the impact of US tax reform. Excluding the Euro 159 million
impact of these non-recurring items on 2017 results, 2018 net
profit3 would have
been 90 bps accretive, benefiting from effective business and
financial management. For the second consecutive year, net margin
was over the 10% threshold in 2018.
Free cash flow8 was
Euro 923 million and, net of exchange rate headwinds, would have
been around Euro 1.1 billion3, while net
debt decreased by 42%, driving further improvement of the group's
net debt/adjusted EBITDA2 ratio to
0.2x.
For further details on Luxottica's
strategic initiatives and disclosure of its standalone FY2018
results as well as fourth quarter sales, please refer to the
appendix.
Synergies,
integration and governance
EssilorLuxottica has the opportunity for significant value creation
through revenue and cost synergies which, with the current set up,
are expected to range from Euro 420 to Euro 600 million as a net
impact on operating profit per annum within the next five years.
Revenue synergies are expected in the Euro 200-300 million range,
as a result of the capability of EssilorLuxottica to develop
innovative and high-quality products optimizing the interaction
between frames and lenses, serve the industry better through a
broader distribution and a more efficient logistics platform. Cost
synergies are expected to come in the range of Euro 220-300 million
from the combined supply chain optimization, G&A
rationalization and sourcing savings. EssilorLuxottica expects
synergies to further accelerate once the Group is operating as a
fully integrated structure.
Strategic and business integration
matters, along with governance topics, are being considered and
worked upon by the management teams of Essilor International and
Luxottica, in order to ensure a seamless execution of the synergy
plan and the growth strategy of EssilorLuxottica.
Mandatory
exchange offer for Luxottica shares
On October 11, 2018, EssilorLuxottica launched a mandatory exchange
offer pursuant to the Italian law, for all remaining outstanding
Luxottica shares. As a result of the acquisition of Luxottica
shares tendered in the offer, on December 5, 2018, EssilorLuxottica
reached a stake of more than 90% but less than 95% of Luxottica's
share capital. As a result, EssilorLuxottica initiated a sell-out
procedure for the remaining outstanding Luxottica shares. Having
crossed the 95% threshold in the share capital of Luxottica at the
settlement of the "sell-out" procedure on January 18, 2019,
EssilorLuxottica then initiated a "squeeze-out" procedure that was
completed on March 5, 2019. In accordance with the rules of the
Italian stock exchange, Borsa Italiana ordered the delisting of
Luxottica shares from the MTA on that settlement date.
Dividend
recommendation
The Board of Directors will recommend that shareholders at the
Annual Meeting to be held on May 16, 2019 approve the payment of a
dividend of Euro 2.04 per share.
Outlook for
2019
In 2019, the Group is projecting the following, including synergies
and at constant exchange rates3:
Conference
call
A conference call in English will be held today at 10:30 am
CET.
The meeting will be available live and may also be heard later
at:
https://hosting.3sens.com/EssilorLuxottica/20190308-2690365F/en/webcast/startup.php
Forthcoming
investor events
-
May 7, 2019: Q1 2019 sales
-
May 16, 2019: Shareholders' General Meeting in
Paris
-
July 31, 2019: H1 2019 results
-
September 18, 2019: Capital Market Day
-
October 30, 2019: Q3 2019 sales
Notes to the
press release
1 Pro forma: The
unaudited pro forma consolidated financial information has been
prepared for illustrative purposes only and does not take into
account the results of operations and financial condition that
EssilorLuxottica would have achieved if the contribution of
Luxottica shares by its majority shareholder had actually been
realized on January 1, 2018 or January 1, 2017. There can be no
assurance that the assumptions used to prepare the unaudited pro
forma consolidated financial information are accurate in all
respects or that the trends disclosed in the unaudited pro forma
consolidated financial information are indicative of the future
performance of EssilorLuxottica. As a result, EssilorLuxottica's
performance in the future may differ materially from that presented
in the unaudited pro forma consolidated financial
information.
2 Adjusted measures: Adjusted from the
expenses related to the EssilorLuxottica Combination and other
transactions that are unusual, infrequent or unrelated to the
normal course of business as the impact of these events might
affect the understanding of the Group's performance. See detailed
amounts in the appendix.
3 Figures at constant exchange rates have been
calculated using the average exchange rates in effect for the
corresponding period in the previous year.
4 Like-for-like growth: Growth at constant
scope and exchange rates. See definition provided in Note 2.4 to
the consolidated financial statements in the Essilor 2017
Registration Document.
5 Fast-growing countries
include China, India, ASEAN, South Korea, Hong Kong, Taiwan,
Africa, the Middle East, Russia and Latin America.
6 Contribution from operations: Revenue less
cost of sales and operating expenses (research and development
costs, selling and distribution costs and other operating
expenses).
7 Comparable store sales reflect the change in
sales from one period to another that, for comparison purposes,
includes in the calculation only stores open in the more recent
period that also were open during the comparable prior period, and
applies to both periods the average exchange rate for the prior
period and the same geographic area.
8 Free cash flow is defined in the
appendix.
CONTACTS
EssilorLuxottica Investor
Relations
(Charenton-le-Pont) Tel: + 33 1 49 77 42 16
(Milan) Tel: + 39 (02) 8633 4870
E-mail: ir@essilorluxottica.com |
EssilorLuxottica Corporate
Communications
(Charenton-le-Pont) Tel: + 33 1 49 77 45 02
(Milan) Tel: + 39 (02) 8633 4470
E-mail: media@essilorluxottica.com |
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information contained therein.
Source: EssilorLuxottica via Globenewswire
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