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The Board of Directors of Safilo Group S.P.A. approves the financial results for 2010

16/03/11

 

THE BOARD OF DIRECTORS OF SAFILO GROUP S.P.A.
APPROVES THE FINANCIAL RESULTS FOR 2010

 

Key highlights:

  • Net Sales at Euro 261.8 million in Q4 2010, +10.7% compared to Q4 2009
  • Net Sales at Euro 1,079.9 million in full year 2010, +6.8% compared to 2009
  • EBITDA at Euro 25.4 million in Q4 2010 (9.7% margin), from Euro 10.7 million in Q4 2009 (4.5% margin)
  • EBITDA at Euro 107.8 million in full year 2010 (10.0% margin), +85.1% compared to 2009
  • Net Result at Euro 4.4 million in Q4 2010 (1.7% margin) and return to break-even in full year 2010
  • Net Debt at Euro 256.2 million, down from Euro 588.0 million at the end of 2009. Net Debt/EBITDA to 2.4x

Padua, March 16, 2011, h. 5.40pm – The Board of Directors of Safilo Group S.p.A. today approved the consolidated financial statements for 2010¹. The Board of Directors also reviewed the financial statements at December 31, 2010¹, which will be submitted for approval to the Shareholders’ Meeting called for April 27, 2011 (single call).

In the fourth quarter of 2010, Safilo consolidated the improvement in results achieved in the first nine months of the year, registering good progresses in terms of revenues, profitability and net financial position:

  • Revenues increased by 10.7% at current exchange rates. At constant perimeter2 and exchange rates, the growth of sales was equal to 8.0%, driven by the good performance of the American and Asian markets where consumers demand for premium eyewear collections was more solid, in particular in sunglasses.

    In Europe, the Group posted a more moderate improvement of sales, with France, Spain and key accounts achieving the best results.

  • Operating performance grew in the fourth quarter thanks to a recovery of gross margin and a lighter incidence of SG&A expenses. This result, supported by the reduction of financial expenses, allowed the Group to register a positive net result of Euro 4.4 million (1.7% margin).

In full year 2010, the Group’s revenues were up 6.8% over 2009 (+6.0% at constant perimeter2 and exchange rates), EBITDA grew by 85.1% to Euro 107.8 million and the net result was at break-even, positive for Euro 0.7 million.

The improved operating and financial performance, coupled with more focused investments in the core business and the careful control of working capital during the year, allowed the Group to close 2010 with a free cash flow of Euro 74.3 million and to reduce the net debt to 2.4x EBITDA.

Roberto Vedovotto, Chief Executive Officer of the Safilo Group, commented:

“2010 will be remembered as one of the most meaningful years in Safilo’s history and has been characterized by some significant key milestones.

Our new journey started in March with the successful completion of the recapitalization plan which allowed us to rebalance the Group’s capital structure and represented the starting point of a process of ongoing improvements of our economic and financial results, strengthening of the Group’s management team, and renewal of the partnerships with some of the most prestigious fashion and luxury brands.

After two challenging years, Safilo has begun to grow again, leveraging on its critical success factors, in the context of a general improvement of the business environment in the more mature markets and of the strong demand for premium eyewear products in the so-called emerging countries.

Throughout the year, in each of the four quarters we registered top-line growth, significant recovery in profitability and cash flow generation that allowed us to progressively reduce our net debt.

In particular, in the fourth quarter we confirmed the progress registered in the first nine months of the year, and our net financial position was at the lowest level in almost ten years.

Today, we are operating in a healthier economic environment and despite the uncertainties which still persist in selected areas, there are potential business opportunities which we could capitalize on with our enhanced and focused business model.”

Financial highlights

In the fourth quarter of 2010, net sales of Safilo Group totalled Euro 261.8 million, up 10.7% compared to Euro 236.5 million reported in the fourth quarter of 2009 (+8.0% at constant perimeter2 and exchange rates). In full year 2010, the Group’s revenues reached Euro 1,079.9 million, increasing by 6.8% over 2009 (+6.0% at constant perimeter2 and exchange rates).
The trend in sales was the result of:

  • the performance of the wholesale channel, with revenues of Euro 241.8 million in the fourth quarter of 2010, up 13.8% at current exchange rates (+7.5% at constant exchange rates) compared to Euro 212.4 million in the same period of 2009.

    All the top licensed brands achieved double digit growth rates in the quarter, driven by solid volume increases and improving price/mix, particularly in the fast growing markets. The house brand Carrera continued to perform well, with very good results in Europe and in the US market thanks to its further expansion process.

    In full year 2010, the wholesale channel grew by 9.8% to Euro 992.9 million (+5.3% at constant exchange rates), compared to Euro 904.4 million in 2009.

  • the performance of the retail channel, with sales of Euro 20.0 million in the fourth quarter of 2010, up 14.9% at constant perimeter2 and exchange rates, mostly thanks to the strong results of the sunglass business at the Group’s Solstice stores in the US. In full year 2010, retail sales increased by 15.6% at constant perimeter2 and exchange rates.

Taking into account the disposal of the Australian and Spanish stores which occurred in December 2009, the retail channel reported a contraction of 17.3% in the fourth quarter and of 18.5% in full year 2010.

From a geographical standpoint, in the fourth quarter of 2010, sales in the Americas grew to Euro 109.3 million, up 24.7% at current exchange rates, 13.2% at constant exchange rates, further accelerating the pace of growth achieved in the previous nine months of 2010.
This performance was the result of the positive sunglass business in North America across all the Group’s important brands and distribution channels as well as the strong rise of Latin American markets where the Group is increasing its focus in terms of organisation and service.
In full year 2010, sales in the Americas reached Euro 460.5 million, increasing by 15.1% at current exchange rates, 7.8% at constant exchange rates.

Sales performance in Europe remained positive in the fourth quarter of 2010 (at constant perimeter and exchange rates), despite some areas of market weakness and volatility. France, Spain and key accounts achieved the best results thanks to the good performance of the top licensed brands as well as the already mentioned growing penetration of the house brand Carrera. Sales in Italy remained relatively stable, while Greece continued to be weak.
In the fourth quarter of 2010, sales stood at Euro 106.2 million, -0.6% compared to the same period of 2009, +2.4% at constant perimeter and exchange rates.
In full year 2010, sales in Europe totalled Euro 440.4 million, contracting by 1.0% over 2009. Sales increased by 2.3% at constant perimeter and exchange rates, despite the distribution rationalization in the close-out channels.

Asian markets registered double digit growth rates also in the fourth quarter of 2010, with particularly strong results in China where the Group’s business more than doubled in the period thanks to the growing success of the high-end collections.
The travel retail business continued to support the region’s performance, whereas trading conditions in Japan marginally improved.
Sales in Asia in the fourth quarter of 2010 were of Euro 40.7 million, up 25.5% at current exchange rates, 14.0% at constant exchange rates. In full year 2010, sales in the region totalled Euro 161.6 million, increasing by 23.7% at current exchange rates, 15.7% at constant exchange rates.

Gross profit, amounting to Euro 147.2 million in the fourth quarter of 2010, grew by 16.7% compared to the gross profit of Euro 126.1 million registered in the fourth quarter of 2009.
Like in the previous quarters of the year, profitability improved thanks to the better absorption of production capacity, reaching 56.2% of sales from the 53.3% of the same period of 2009.

In full year 2010, gross profit totalled Euro 629.9 million, 58.3% of sales compared to 56.6% reported in the full year 2009.

Operating profit (EBIT) totalled Euro 15.4 million in the fourth quarter of 2010, compared to the operating loss from ordinary activities of Euro 5.5 million registered in the fourth quarter of 2009.
Operating profitability stood in the period at 5.9% of sales thanks to the recovery of the industrial margin and the lower incidence of SG&A expenses, mainly as a result of lower retail costs after the sale of the retail chains in Australia and Spain. Selling and marketing costs also benefitted of the more efficient commercial organisation implemented by the Group.

In full year 2010, operating profit totalled Euro 67.8 million compared to the operating profit from ordinary activities of Euro 16.1 million of full year 2009.
Operating profitability in 2010 improved to 6.3% of sales compared to the 1.6% margin from ordinary activities of 2009.

EBITDA was equal to Euro 25.4 million in the fourth quarter of 2010 compared to the EBITDA of Euro 10.7 million achieved in the same period of 2009. The EBITDA margin stood at 9.7% of sales, improving by 520 basis points over the 4.5% EBITDA margin reached in the fourth quarter of 2009.

EBITDA in full year 2010 totalled Euro 107.8 million, increasing by 64.2% compared to the EBITDA from ordinary activities of Euro 65.7 million registered in 2009. The margin improved to 10.0% of sales, 350 basis points over the 6.5% EBITDA margin from ordinary activities achieved in 2009.

The Group’s net result was positive for Euro 4.4 million in the fourth quarter of 2010 compared to the loss from ordinary activities of Euro 12.9 million registered in the same period of 2009.
The strong reduction of net interest expenses, due to the much lower net debt, contributed to the positive quarterly net result, which allowed the Group to close full year 2010 at break-even, with a net income of Euro 0.7 million (the loss from ordinary activities was equal to Euro 33.7 million in 2009).

Key Cash Flow data

Free Cash Flow in 2010 was positive for Euro 74.3 million compared with the cash absorption of Euro 10.8 million recorded in 2009.
In the fourth quarter of 2010, the Group generated a positive free cash flow of Euro 9.8 million thanks to the stronger business fundamentals and to the further reduction of working capital. The latter was achieved despite the increase in stock operated by the Group in the last months of the year to respond to volumes growth and service improvement. The seasonal rise of inventories and trade receivables was in fact temporarily counterbalanced by the contextual increase of trade payables.
The gross outflow for investing activities stood at Euro 10.4 million in the fourth quarter of 2010 (Euro 6.1 million in the fourth quarter of 2009) and it was partially counterbalanced by the proceeds from the disposal of the retail operations in Mexico occurred in December 2010.
In full year 2010, total investments, net of disposals, stood at Euro 23.3 million (Euro 22.3 million in 2009), below depreciation and amortization costs which in 2010 totalled Euro 40.0 million (Euro 49.5 million in 2009).

The Net Debt at the end of December 2010 declined to Euro 256.2 million compared to Euro 262.7 million at the end of September 2010, taking the leverage ratio (Net debt/EBITDA adj. LTM) to 2.4x from 2.8x at the end of September.

Outlook
In the first months of 2011, Safilo Group continues to register positive trends across all its main product categories. As evident in the previous year, the American and Asian markets are recording the best performance, while the recovery remains more moderate in Europe, still weak in some areas.

 

Following the Group’s recent return to the net break-even point after two years of losses and the completion of the restructuring plan in March 2010 aimed at strengthening the Group’s capital structure, the Board of Directors deemed it advisable not to propose to the Shareholders’ Meeting the distribution of a dividend.

 

Other information
As required by Article 84-bis of the Regulations for Issuers, approved with Consob Resolution no. 11971 on May 14, 1999 and subsequent amendments, notice is hereby given that, with reference to the Stock Option Plan 2010 – 2013, the Board of Directors today awarded the Options of the Second Tranche, after having identified, on the basis of the proposal of the Remuneration Committee, the eligible beneficiaries. All information are indicated in the table in Appendix B.
The features of the instruments awarded are the same as those described in the press release issued on October 4, 2010 and in the documents related to the Plan, available on the web site of the company.

………………….

1 The consolidated Financial Statements and Financial Statements are currently subject to audit activities as yet not concluded.
2 Excluding the sold optical retail chains in Australia and Spain, which had recorded sales of Euro 8.4 million in the fourth quarter of 2009 and Euro 36.3 million in full year 2009.

 

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