EssilorLuxottica: First-half 2019 results - Combination at work and acceleration of the integration process - Strong free cash flow
First-half 2019 results
Combination at work and acceleration of the integration process
Strong free cash flow7
- Revenue growth of 7.3%1 (+3.9%1 at constant exchange rates2)
- 2Q sales growth higher than in 1Q at constant exchange rates2
- Adjusted6 net profit growth in line with revenue growth1
- Free cash flow7 of Euro 748 million
- Management focus on accelerating the integration and simplification of the Group
- Full-year objectives confirmed
Charenton-le-Pont, France (July 31, 2019 – 7:00am) - The Board of Directors of EssilorLuxottica met on July 30, 2019 to approve the condensed consolidated interim financial statements for the six months ended June 30, 2019. The Statutory Auditors have performed a limited review of these financial statements. The Board of Directors has also approved the Unaudited Pro Forma1 condensed Consolidated Interim Financial Information, which has been prepared for illustrative purposes only.
“We are pleased with the results of the first half which show growth for the Group in terms of sales and a steady pace of profitability. The quality of our business is reflected not only in the numbers but also in the confirmation of trust and collaboration from Bulgari and other leading luxury and fashion houses. We now expect the second half of the year to deliver further growth and a strong improvement in profitability compared to last year, thanks to the launch of a new generation of products in the market that will allow us to improve the consumer experience. The expected synergies are well addressed, and we will take action on them according to the plans we communicated to the market,” commented the Executive Chairman Leonardo Del Vecchio.
“EssilorLuxottica’s results are a testament to its powerful mission and integrated yet open business model. Unmet demand for eyesight improvement translated into particularly significant gains for Essilor’s vision correction and sun protection solutions as well as for Luxottica’s retail activities. The good results posted by the divisions are also proof that buy-in is strong among eyecare professionals for our efforts to reimagine the consumer experience. Our investments in customer relations, network segmentation, innovative products and services, omni-channel solutions, the digitalization of our businesses and fast-growing markets, are all bearing fruit. At the same time, the integration of the two companies is moving forward in order to create a more efficient and responsive operating platform”, said Hubert Sagnières, Executive Vice Chairman of EssilorLuxottica.
First-half 2019 adjusted6 results
|In million of Euros||1H 2019|| 1H 2018*|
|Change||Change at constant exchange rates2|
|Adjusted6 gross profit||5,549||5,195||+6.8%||+3.1%|
|% of revenue||63.2%||63.5%|
|Adjusted6 operating profit||1,512||1,450||+4.3%||-0.4%|
|% of revenue||17.2%||17.7%|
|Adjusted6 net profit||1,099||1,029||+6.8%||+1.9%|
|% of revenue||12.5%||12.6%|
* 1H 2018 comparative information has been restated following the application of IFRS 16 Leases.
EssilorLuxottica reported revenue of Euro 8,776 million, up 7.3% at current exchange rates and up 3.9% at constant exchange rates2, compared to first-half 2018 pro forma1 revenue. Growth at constant exchange rates2 gathered pace throughout the period, with 1Q up 3.7% and 2Q up 4.1%. Adjusted6 operating profit and adjusted6 net profit increased by 4.3% and 6.8% respectively.
During the first half of the year, the performance of the Company was characterized by:
- Lenses & Optical Instruments and Sunglasses & Readers delivering revenue growth of 4.9% and 8.4% respectively at constant exchange rates2;
- Retail up 3.6% at constant exchange rates2, decelerating in the second quarter, due to both Sears difficulties and the unseasonal weather in May and early June. The division expanded its footprint in target areas: Sunglass Hut in Europe, Ray-Ban in China with more than 150 locations now open in the country, and Óticas Carol in Brazil;
- Wholesale up by 1.7% at constant exchange rates2, accelerating in the second quarter owing to a rebound in North America mainly driven by independents and department stores. The STARS program generated more than 12% of net sales of the division and further expanded globally, with more than 13,000 doors served today;
- Ray-Ban sustaining its pace of healthy growth across all regions and channels, with a fast-growing presence in the direct-to-consumer channel (mono-brand stores and Ray-Ban.com);
- Fast-growing markets4 driving revenue in geographic terms with around 10% growth at constant exchange rates2. These countries represented close to 20% of consolidated sales;
- Delivering significant innovation to the market with Blue UV CaptureTM, a lens providing enhanced protection against both UV rays and harmful blue-violet light; EyezenTM Start, a new generation of lenses for single vision wearers under 40 years old; Vision-RTM 800, a more precise eyesight testing device; and Visioffice® X, the latest generation of optical measuring systems. In parallel, the Company prepared for the launch, at the very beginning of the second half, of Transitions® Signature® GEN 8TM, a new light management solution offering both darker tones and faster activation. In eyewear, Luxottica reinforced its position as the most digital forward eyewear company in the world by presenting its latest brand collections to top customers in a high-engagement, hi-tech environment showing what the future of optical retail could look like;
- Continuing digitization of the business illustrated by close to 14% online revenue growth at constant exchange rates2. Several factors speed up the development of an omnichannel platform giving consumers access to the latest digital technologies combined with the expertise of eyecare and eyewear professionals. Such factors include the deployment of the “Digital Acceleration” program at Essilor, further development of Luxottica’s in-store digital communications and digital tools for its retail brands and wholesale customers, strong growth at Ray-Ban.com and Sunglasshut.com and Essilor’s acquisition of online retailer Brille 24 in Germany;
- The resumption of the bolt-on acquisition strategy with four transactions completed in Europe, Latin America and China.
Synergies and integration
During the first half of the year, the Group has put in place a structured organization and solid process to drive its integration and deliver synergies confirmed to range from Euro 420 to Euro 600 million as a net impact on adjusted6 operating profit within the next three to five years.
As announced on May 13, 2019, the integration process and simplification of the Group are being accelerated by the management team. Integration work is now in full swing. 22 priority work streams are being implemented globally under the leadership of key executives and with the full commitment from dedicated teams. They seek to leverage the complementarity between frames and lenses, the capillarity of the Group’s retail networks, the cross-selling opportunities in wholesale while enhancing efficiency, optimizing the supply chain and growing and shaping the eyecare and eyewear industry.
Eradicating poor vision around the world
EssilorLuxottica’s mission is to help people around the world to “See more, be more and live life to its fullest”. This is the cornerstone of all its businesses and the culture shared by all its employees. To further this mission during the first half, Essilor notably continued to underscore the importance of good vision for safe driving. At the 5th United Nations Road Safety Week, Essilor unveiled a new Memorandum of Understanding with French automotive company Renault to develop innovative solutions to improve drivers’ visual experience. The Company also conducted nearly 1,000 vision screenings during the 24 Hours of Le Mans race. In Bhutan, Essilor and the royal government officially launched their partnership to make this country the first one in the world to eradicate poor vision. The first 10,000 pairs of eyeglasses have been distributed to the “Bhutan School Sight” program, which is offering students aged six to eighteen vision screening and glasses if they need them. In India, Essilor’s 2.5 New Vision Generation business reached the milestone of equipping 10 million people from underserved communities with glasses. The innovations in terms of distribution and technology delivered by Eye Mitra, its network of primary eye care providers, played a key role in crossing this milestone. They were recognized at the 6th annual Eye Mitra Convention in Jaipur last May. Separately, Essilor’s Vision for Life supported a campaign to raise awareness for eye health among the poorest communities in India with support from a major film star.
In the first half, Luxottica, through its support for OneSight, an independent non-profit organization of which the company is the founding sponsor, served close to 17,000 patients providing eye exams and glasses across 17 charitable clinics located in the US, Jordan, Puerto Rico, Chile, Mexico, Cambodia, China, Brazil, and Thailand. Onesight also opened 25 brand new Sustainable Vision Centers in 5 countries (US, Rwanda, Zambia, China, Bangladesh). Each clinic is staffed with Luxottica employees and doctors and over 575 Luxottica employees had an opportunity to volunteer in the first half of 2019.
EssilorLuxottica has created a new form of cultural integration among Essilor and Luxottica employees, by encouraging several Essilor employees to volunteer in OneSight missions in the first half of the year.
EssilorLuxottica to acquire HAL’s 76.72% interest in GrandVision
EssiloLuxottica announced today an agreement under which it will acquire HAL Holding N.V.’s entire 76.72% stake in GrandVision N.V. at a cash price per share of Euro 28 (see page 12 of the interim management report).
Acquisition of Barberini
The Group is announcing that all the relevant antitrust approvals regarding the acquisition of Barberini have been obtained and that all the conditions precedent to the transaction closing have been met (see page 13 of the interim management report).
Renewal of the licence agreement with Bulgari
Luxottica and Bulgari SpA today announced the early renewal of their exclusive license agreement (see page 13 of the interim management report).
Outlook for 2019
EssilorLuxottica confirms its financial objectives for 2019. Including synergies and at constant exchange rates2, it is projecting the following:
- Sales growth: +3.5-5%
- Adjusted6 operating profit growth: 0.8-1.2x sales
- Adjusted6 net profit growth: 1-1.5x sales
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:
Forthcoming investor events
- September 25, 2019: Capital Market Day in London, UK
- October 30, 2019: Q3 2019 sales
1 Pro forma: the Unaudited Pro Forma Condensed Consolidated Interim Financial Information has been produced for illustrative purposes only, with the aim of providing comparative information for the first six months ended June 30, 2018 as if the combination between Essilor and Luxottica had occurred on January 1, 2018. For further details, please refer to the table in the Appendix.
2 Constant exchange rates: figures at constant exchange rates have been calculated using the average exchange rates in effect for the corresponding period in the previous year.
3 Like-for-like: growth at constant scope and exchange rates.
4 Fast-growing countries or markets: include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia, Eastern Europe and Latin America.
5 Comparable store sales or comps: reflect, for comparison purposes, the change in sales from one period to another by taking into account in the more recent period only those stores already open during the comparable prior period. For each geographic area, the calculation applies the average exchange rate of the prior period to both periods.
6 Adjusted measures or figures: adjusted from the expenses related to the combination between Essilor and Luxottica 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.
7 Free Cash Flow: Net cash flow provided by operating activities less the sum of Purchase of property, plant and equipment and intangible assets and Cash payments for the principal portion of lease liabilities according to the IFRS consolidated statement of cash flow.
EssilorLuxottica is a global leader in the design, manufacture and distribution of ophthalmic lenses, frames and sunglasses. Formed in 2018, its mission is to help people around the world to see more, be more and live life to its fullest by addressing their evolving vision needs and personal style aspirations. The Company brings together the complementary expertise of two industry pioneers, one in advanced lens technology and the other in the craftsmanship of iconic eyewear, to set new industry standards for vision care and the consumer experience around it. Influential eyewear brands including Ray-Ban and Oakley, lens technology brands including Varilux® and Transitions®, and world-class retail brands including Sunglass Hut and LensCrafters are part of the EssilorLuxottica family.
In 2018, EssilorLuxottica had nearly 150,000 employees and pro forma consolidated revenues of Euro 16.2 billion.
The EssilorLuxottica share trades on the Euronext Paris market and is included in the Euro Stoxx 50 and CAC 40 indices.
Codes and symbols: ISIN: FR0000121667; Reuters: ESLX.PA; Bloomberg: EL:FP.
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