The financial results of Safilo Group S.p.A. as dated 4th August 2015 in Padua mirrored- positive sales momentum in core markets, partly offset by expected softness in Asia; strong free cash flow generation and records low Net Debt; and good progress on 2020 initiatives
The Board of Directors of Safilo Group S.p.A. – the fully integrated Italian eyewear creator, listed on the Milan Stock Exchange – has reviewed and approved the results of the second quarter and first half of 2015.
Net sales for the first six months of 2015 grew by 11.3% on a reported basis and by 1.0% at constant currencies, with the business recording an improvement in the second quarter, up 12.0% (+1.2% at constant currencies). The main growth contributors were key Western European countries, North America, MEA and Latin America.
In the first half of 2015, gross profit grew by 6.9%, having increased by 7% in the second quarter. Gross margin equalled 60.7% of sales in the first six months and 60.9% in the second quarter. The contraction compared to the comparable periods last year (63.3% and 63.7% respectively in H1 and Q2 2014), continued to be mainly driven by cost inflation increases not yet recovered through industrial efficiencies, as the Group continues to ramp up its cost savings initiatives.
At the operating level, adjusted1 EBITDA was down 12.6% in the first half and 16.9% in the second quarter, with profitability reflecting the margin performance recorded at the gross profit level. In the second quarter, the adjusted1 EBITDA margin also reflected the Group’s continuing investments in the new global advertising, product campaigns and strengthening of managerial capabilities, all of which will benefit the Group going forward.
Safilo’s adjusted1 Group’s net result in the first six months of 2015 declined by 68.5%, impacted by financial charges behind the net negative exchange rate differences recorded in the first quarter and the effects of the fair value valuation of the equity-linked bonds. In the second quarter, the adjusted1 Group’s net result mainly reflected the operating dynamics described above.
In the period, Safilo generated Free Cash Flow of Euro 51.6 million helped on the one hand by the first of three compensation payments of Euro 30 million received in January from Kering, and on the other hand by the ongoing improvement of net working capital management driven by a reduction in inventory days on hand and accounts receivable DSO (days of sales outstanding). At the end of June 2015, Group net debt further declined to Euro 110.1 million, improving the adjusted1 financial leverage at 1.0x.
Luisa Delgado, CEO, commented: “We continue on our path of investment as we reinvent ourselves to deliver sustainable growth and higher margins. The lower gross margin result achieved in the first half, impacted by cost inflation, is a key focus area for our cost savings and efficiency interventions going forward. On balance, we are satisfied with the progress of the strategic initiatives that we are implementing in line with our 2020 strategic plan.
Our key geographies are recording good growth, namely our core markets of North America and key Western European countries, as well as the new regions of LA and MEA that we established last year, while our Asia capability re-set is progressing to plan with a slowing decline in the second quarter.
Our licensed brand portfolio is developing positively following the brand re-balancing roadmap of 2020. Our marketing and product interventions on Carrera, Polaroid and Smith including its further integration into Safilo, are showing early results in countries where we have executed with excellence such as Carrera in North America and Polaroid in Spain, and our focus is on now accelerating the roll out.
We are progressing with our supply & distribution network re-invention focused on cost savings, inventory reduction and consolidation of our logistics network. Reductions of inventory days-on hand are starting to be visible, while the overall savings program is ramping up for the second half of the year, and we have announced the first regional distribution centres’ consolidation in the US. Finally, we are progressing well on the capability front and are adding expert knowledge in key business areas including Product, Supply Chain, Brand and Commercial to drive and sustain our strategic transformation.”