EssilorLuxottica: Full year 2019 results / Uplift in Sales and Net
Profit growth / Strong foundation to accelerate synergy delivery
Full year 2019 results
Uplift in Sales and Net Profit
growth Strong foundation to accelerate synergy
delivery
- Revenue growth at constant exchange rates2 of 4.4%,
compared to 3.2% in 2018 pro forma1
- Adjusted6 operating profit: Euro 2,812 million, 16.2%
of revenue
- Adjusted6 net profit attributable to owners of the
parent: Euro 1,938 million, 11.1% of revenue and growth of 4.8%1 at
constant exchange rates2
- Free cash flow7: Euro 1,825 million
- Adjusted6 EPS: Euro 4.46
- Dividend recommendation: Euro 2.23 per share, scrip
dividend proposed
Charenton-le-Pont, France (March 6, 2020
– 7:00am) - The Board of
Directors of EssilorLuxottica met on March 5, 2020 to approve the
consolidated financial statements for the year ended December 31,
2019. These 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 Restated
Unaudited Pro Forma1 Consolidated Financial Information for the
year ended December 31, 2018, which has been prepared for
illustrative purposes only.
“In its first full year, EssilorLuxottica
delivered a solid performance. It advanced on its Mission and
delivered innovative products at every price point to customers and
consumers worldwide while generating profitable growth. This
translated into strong revenue, free cash flow and net profit
growth, in line with guidance. The Company also implemented a range
of structural decisions in order to start the integration process
and the delivery of the expected synergies presented at its Capital
Markets Day. Essilor, for its part, performed strongly. It
continued to leverage its unique innovation capabilities in vision
care and eyewear, its digital platforms and the flexibility
provided by its global network of interconnected plants and
prescription laboratories”, said Laurent Vacherot, CEO of
Essilor.
"When we look at Luxottica’s performance over
the past year, there is so much to be proud of, both in terms of
our solid results and many notable achievements - our continued
digital transformation in particular proved that the work we’ve
done over the past five years is paying off. Along with growing and
improving our profits, we set a new standard for the way technology
can elevate an entire organization, from online sales growth to our
deep connections with consumers across every channel. These
successes, along with our outstanding cash flow generation of 1.2
billion Euro, were key contributors to EssilorLuxottica’s overall
results for the year”, commented Francesco Milleri, Deputy Chairman
and CEO of Luxottica.
Full year 2019 adjusted6 results
2019 is the first year in which
EssilorLuxottica’s consolidated statement of profit or loss shows
the full year performance of both Essilor’s and Luxottica’s
businesses. However, since the 2018 information presented in the
statement of profit or loss is affected by the accounting of the
combination between Essilor and Luxottica, the financial
information deemed relevant to compare 2019 performance is based on
the restated pro forma1 information for the year ended December 31,
2018.
|
In millions of Euros |
2019 |
2018* pro
forma1 |
Reported Change |
| Revenue |
17,390 |
16,194 |
+7.4% |
| Adjusted6
gross profit |
10,887 |
10,209 |
+6.6% |
| % of revenue |
62.6% |
63.0% |
|
| Adjusted6
operating profit |
2,812 |
2,618 |
+7.4% |
| % of revenue |
16.2% |
16.2% |
|
| Adjusted6
net profit attributable to owners of the parent |
1,938 |
1,774 |
+9.2% |
| % of revenue |
11.1% |
11.0% |
|
* The 2018 comparative information has been
restated following the application of IFRS 16 Leases, as well as to
reflect the finalization of the purchase price allocation (“PPA”)
related to the EssilorLuxottica Combination.
In 2019, EssilorLuxottica’s full year revenues
grew by 7.4% compared to prior-year pro forma1 revenue (4.4% at
constant exchange rates2). The Company’s adjusted6 gross profit as
a percent of sales came in at 62.6% while adjusted6 operating
profit was stable at 16.2% of sales. Adjusted6 net profit
attributable to the owners of the parent of Euro 1,938 million
represents an increase of 9.2%1 compared to the prior year (4.8%1
at constant exchange rates2).
Full year 2019 highlights
- Strong revenue growth at constant exchange rates2 across all
divisions with the best performance from Sunglasses & Readers
up 8.9%, Lenses & Optical Instruments up 5.5%, and Retail up
4.0%;
- Direct e-commerce, which represented around 5% of consolidated
revenue, grew by 16% at constant exchange rates2, with positive
trends across all major platforms and regions;
- On a geographical basis at constant exchange rates2, Fast
Growing Markets4 expanded by 8.5% and represented close to 20% of
revenue, Europe grew by 5.1% and North America was in line with
global market growth at 3.1%;
- Adjusted6 operating profit as a percent of sales remained
stable reflecting underlying margin improvement offset by
investments behind key brands and growth initiatives
worldwide;
- Free cash flow7 amounted to Euro 1.8 billion, the same level as
last year despite the impact of fraudulent financial activity at
one of Essilor’s plants in Thailand;
- Key investment fueled new product launches (notably
Transitions® Signature® GEN 8TM and Vision-RTM 800), further
digitalization of the business, stronger offerings on proprietary
e-commerce sites, refurbishment of key retail stores and expansion
of operating structures in Fast Growing Markets4 among others;
- Activation of synergies in line with Company’s expectations,
with structural decisions creating a strong foundation for an
increase in synergy delivery in 2020 and 2021;
- Continued strong momentum in external growth with the proposed
acquisition of GrandVision and several bolt-on transactions such as
Barberini in Italy and Brille24 in Germany.
Fourth quarter 2019
highlights
- Lenses & Optical Instruments grew by 5.2% at constant
exchange rates2 thanks to Fast Growing Markets4, the Transitions®
Signature® GEN 8TM launch in the United States and double
digit-growth in e-commerce;
- Sunglasses & Readers grew by 10.1% at constant exchange
rates2 with a strong performance by Xiamen Yarui Optical in China,
fueled by its expansion into optical frames and online sales;
- Wholesale rose by 2.4% at constant exchange rates2 thanks to
stronger performance in North America (including independents), key
markets in Europe, steadily sound trends in Brazil with Óticas
Carol and rebuilt Mainland China;
- Retail continued on its solid path, up 4.6% at constant
exchange rates2, thanks to the optical networks in North America
(including positive trends at LensCrafters) as well as the entire
business in Australia, Europe and Brazil;
- Fraudulent financial activity was discovered at one of Essilor
International’s plants in Thailand. The financial impact has been
fully recorded in the 2019 consolidated statement of profit or
loss for an amount of Euro 185 million after taking into
account foreign exchanges impacts;
- The Company launched a bond issuance for a total amount of Euro
5 billion, notably to (re)finance a portion of the consideration to
be paid in relation to the proposed acquisition of GrandVision, to
(re)finance the existing debt of the Company and to fund general
corporate purposes. Group net debt amounted to Euro 4,046 million
at the end of December 2019, compared to Euro 3,849 at the end of
December 2018 (restated following the implementation of IFRS 16
Leases).
Synergies and integration The
Company has started to drive integration and deliver revenue and
cost synergies. It confirms that the net impact of those synergies
on adjusted6 operating profit is expected to be in the range
of:
- Euro 300 to Euro 350 million in the period
2019-2021;
- Euro 420 to Euro 600 million by
2022-2023.
In 2019, the first synergies generated as part
of this plan were in line with internal expectations. This included
the development of Essilor lenses, including the most innovative
and technologically advanced categories, within the Company’s own
retail networks as well as key initiatives in R&D, procurement,
prescription laboratories and insourcing.
In addition, structural decisions were made
during the year to create a strong foundation for further
integration and accelerate synergy delivery in 2020 and 2021, in
line with the plan. These decisions include:
- Defining one single IT platform to be rolled out across the
Company, after the ongoing pilot project in Italy;
- Creating one single network of prescription laboratories, as
part of an integrated supply chain;
- Establishing a unified platform for the provision of complete
pairs of branded glasses, starting with the availability of full
prescription products under the Ray-Ban brand both in the clear and
sun segments;
- The full integration of Costa into the brand portfolio of
Luxottica;
- A common employee shareholding plan, which was extended to
Luxottica employees in Italy in 2019 with a subscription rate of
over 67%.
Eliminating poor vision around the world
Essilor has created more than 15,000 inclusive
businesses worldwide since 2013, which have the potential to give
more than 300 million people access to vision health. These access
points delivered vision solutions to 10.7 million new eyeglass
wearers in 2019 alone, bringing the total for the past seven years
to 33.5 million.These efforts earned EssilorLuxottica the 17th spot
in Fortune Magazine’s annual Change the World list in 2019. In this
same spirit of raising awareness on good vision, Essilor made
presentations in different parts of the world to leverage the
report it published on the sidelines of the last United Nations
General Assembly session, entitled “Eliminating Poor Vision in a
Generation: What will it take to eliminate uncorrected refractive
errors by 2050?”. The report quantifies the scale of uncorrected
poor vision in the world and recommends a cumulative investment of
$14 billion over the next 30 years to eliminate it.In 2019, Essilor
worked toward this goal through partnerships to eliminate poor
vision in many regions. In Bhutan, 30,000 pairs of glasses have
been delivered to date to make this country the first in the world
to eliminate poor vision. In India, more than 143,000 people were
screened to put the Doddaballapura region on track to be the first
in the country to also eliminate poor vision by 2021. In Nepal, the
company signed a letter of intent to provide access to eye care to
the 350,000 residents of the Bhaktapur district. And in China,
Essilor worked with the Huoqiu County to eliminate poor vision in
the county within three years. Partnerships were also launched with
governmental ministries in France, Kenya and India to promote eye
exams and raise awareness about the importance of visual health in
schools or among underprivileged children (see page 15 for more
details).
Subsequent events
COVID-19The current COVID-19
epidemic has a negative impact on the Company’s business in Greater
China, which represents approximately 5% of consolidated revenue.
So far, the virus has also slightly impacted the Company’s revenue
performance in other regions. At the current level, inventory is
sufficient to meet several weeks of demand.In terms of production,
EssilorLuxottica plants in China are currently operating at
slightly reduced capacity, which is quickly normalizing, while the
plants in Italy and all other locations are currently running at
full capacity. Contingency plans can be activated in case of a
protracted pandemic. They would aim at optimizing the Company’s
global infrastructure. EssilorLuxottica can rely on a worldwide
network of plants and laboratories, which allow flexibility and
continuity.
GrandVisionThe European
Commission has initiated a Phase II review of the proposed
acquisition of GrandVision. The transaction has been
unconditionally cleared so far in the United States, Russia and
Colombia, and it is currently under review also in Brazil, Chile,
Mexico and Turkey (see page 28 for more details).
FraudThe Company announced on
December 30, 2019 that it had discovered fraudulent financial
activity at an Essilor plant in Thailand. Since then, Essilor
International has implemented a wide range of corrective measures
under the supervision of the EssilorLuxottica Board of Directors
(see page 28 for more details).
Management Changes
EssilorLuxottica confirms that the search for a
new CEO is ongoing. It is now also considering internal
candidates. The final appointment is expected to be made by the end
of 2020.
David Wielemans is appointed co-CFO of
EssilorLuxottica alongside Stefano Grassi, in replacement of Hilary
Halper.
Ariel Bauer is appointed co-Head of Investor
Relations of EssilorLuxottica alongside Giorgio Iannella, in
replacement of Véronique Gillet.
DividendThe Board of Directors
will recommend that shareholders at the Annual Meeting to be held
on May 15, 2020 approve the payment of a dividend of Euro 2.23 per
share. Shareholders will be offered the option of receiving their
dividend in cash or in newly issued shares. The dividend will be
paid – or the shares issued – as from June 15, 2020.
OutlookThe Company’s financial
objectives for 2020 assume that the COVID-19 outbreak will subside
in the next few months.
Based on this assumption, and excluding any
contribution from GrandVision, EssilorLuxottica expects to grow in
sales and profits. Including synergies and at constant exchange
rates2, it is projecting the following:
- Sales growth: +3.0%-5.0%
- Adjusted6 operating profit growth: 0.7-1.2x sales growth
- Adjusted6 net profit growth: 0.7-1.2x sales growth
In addition, due to the COVID-19 outbreak, the
Company’s current expectation is for revenue growth to be below the
annual trend in the first half of the year, followed by a recovery
in the second half.
Conference callA conference
call in English will be held today at 11 am CET.The meeting will be
available live and on a replay mode
at:https://channel.royalcast.com/webcast/essilorluxotticaen/20200306_1/
Upcoming investor events
- Q1 2020 Sales: May 5, 2020;
- Annual Shareholders Meeting: May 15, 2020;
- H1 2020 Results: July 31, 2020.
Notes
1 Pro forma: the Restated
Unaudited Pro Forma Consolidated Financial Information has been
produced for illustrative purposes only, with the aim of providing
comparative information for the year ended December 31, 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
or income 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 2019, EssilorLuxottica
had over 150,000 employees and consolidated revenues of Euro 17.4
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.
CONTACTS
|
EssilorLuxottica Investor
Relations(Charenton-le-Pont) Tel: + 33 1 49 77 42
16(Milan) Tel: + 39 (02) 8633 4870E-mail:
ir@essilorluxottica.com |
EssilorLuxottica Corporate
Communications(Charenton-le-Pont) Tel: + 33 1 49 77 45
02(Milan) Tel: + 39 (02) 8633 4470E-mail:
media@essilorluxottica.com |
Excerpts from the full year 2019
management report
Full year 2019 revenue by operating
segment
|
In millions of Euros |
2019 |
2018 Restated*
Pro forma1 |
Change at constant rates2 |
Currency effect |
Change (reported) |
| Lenses &
Optical Instruments |
6,791 |
6,283 |
+5.5% |
+2.6% |
+8.1% |
| Sunglasses &
Readers |
885 |
787 |
+8.9% |
+3.6% |
+12.5% |
| Equipment |
221 |
210 |
+2.0% |
+3.3% |
+5.3% |
|
Essilor revenue |
7,897 |
7,280 |
+5.8% |
+2.7% |
+8.5% |
| Wholesale |
3,260 |
3,145 |
+1.8% |
+1.9% |
+3.7% |
| Retail |
6,232 |
5,769 |
+4.0% |
+4.0% |
+8.0% |
|
Luxottica revenue |
9,493 |
8,914 |
+3.2% |
+3.3% |
+6.5% |
|
Total |
17,390 |
16,194 |
+4.4% |
+3.0% |
+7.4% |
* 2018 information has been restated following
the application of IFRS 16 Leases.
EssilorLuxottica’s revenue amounted to Euro
17,390 million and increased by 4.4% at constant exchange rates2 in
2019, in the upper half of the Group’s 3.5% to 5% outlook.
Lenses & Optical
Instruments
The Lenses & Optical Instruments division
grew by 5.5% at constant exchange rates2 in 2019, for total sales
of Euro 6,791 million. The division showed strength across all
regions through a continued focus on innovation, fast growing
markets4 and e-commerce. Key milestones in 2019 included the launch
of Transitions® Signature® GEN 8TM in the US market, the success of
the Vision-R™ 800 phoropter in Europe, double-digit growth both in
China, thanks to branded lenses (notably EyezenTM, Crizal® and
Varilux®), and Latin America owing to market expansion activities
and a new partnership with a key player in the region.
Sunglasses & Readers
The Sunglasses & Readers division performed
well in 2019, with revenue rising 12.5% to Euro 885 million (+8.9%
at constant exchange rates2). This reflected robust results in
China, especially for Xiamen Yarui Optical (Bolon™) and strong
market demand for readers and sunglasses at Costa and FGX
International in the United States. Furthermore, e-commerce sales
were once again buoyant for the division, with revenue ending the
period up by more than 20% on a like-for-like3 basis.Lastly, in
keeping with the commitments made to Turkish antitrust authorities
at the time of the combination with Luxottica, Essilor divested its
subsidiary Merve, which markets sunglasses to consumers in
Turkey.
Equipment
The Equipment division grew by 2% at constant
exchange rates2 with a mix of solid market trends in Europe, Latin
America and Asia offset by a slowdown in the capital investment
cycle in other developed markets, partly due to industry
consolidation. On a consolidated financial basis, Europe and Asia
contributed to growth while North America and Latin America were
headwinds. With respect to products, performance was driven by
digitalization, new generation surfacing machines and coating
machines. The order book ended the year slightly up. The business
contributed to group profitability, which enabled continued R&D
investment to support innovation in production methods and lab
efficiency across the global ophthalmic lens industry.
Wholesale
The Wholesale division closed the year with
revenue up by 3.7% to Euro 3,260 million, or +1.8% at constant
exchange rates2, the strongest pace since 2015 thus proving the
effectiveness of the set of strategic initiatives undertaken. All
regions were on the rise, with a remarkable acceleration
experienced by North America over the second part of the year
supported by positive trends at independents, department stores and
third-party e-commerce. The steady growth posted by Europe was
driven by volumes and benefited from the relentless evolution of
STARS. On a global basis, the program is now comprised of
approximately 16,600 doors, representing over 13% of sales for the
Wholesale division. As for Asia, Oceania and Africa and Latin
America, both the regions experienced a deceleration in the second
half of 2019, mainly attributable to poor trends in Hong Kong and
travel retail and a weakening performance in Mexico respectively.
Conversely, Brazil was among the top performers and recorded a
sustained growth, at high single digit pace during the twelve
months, boosted by STARS and Óticas Carol (both meaningfully
increasing the number of doors). Mainland China continued to
leverage the success of the strategic repositioning of the business
undertaken two years ago.
Retail
The Retail division was up 8.0% in revenue to
Euro 6,232 million in the full year, or +4.0% at constant exchange
rates2, with accelerating momentum in the fourth quarter. Revenue
was positive throughout the entire year, with comparable store
sales5 slightly above the parity in the twelve months. In North
America all the networks contributed to the division growth, in
particular the Optical Retail Business led the growth with
LensCrafters posting the strongest quarter of the year (thanks to a
healthy insurance week and a strong price-mix), a solid
contribution from the insurance business unit Eye Med as well as
Target Optical and Pearle Vision. During the fourth quarter the
sales drop was amplified at Sears Optical. In Europe Sunglass Hut
and Salmoiraghi & Viganò kept nicely growing, like both optical
and sun business did in Australia and sun in Brazil. Hong Kong
confirmed to be a drag, with no signs of improvement, while GMO was
impacted by protests in Chile and Ecuador in the last quarter of
the year. Direct e-commerce grew double digit across all the
platforms in the full year, mostly driven by North America that
posted in the fourth the best quarter of the year.
Full Year 2019 revenue by geographical area
|
In millions of Euros |
2019 |
2018 Restated*
Pro forma1 |
Change at constant rates2 |
Currency effect |
Change (reported) |
| North
America |
9,154 |
8,433 |
+3.1% |
+5.4% |
+8.5% |
| Europe |
4,236 |
4,038 |
+5.1% |
-0.2% |
+4.9% |
| Asia, Oceania and
Africa |
2,892 |
2,694 |
+5.4% |
+2.0% |
+7.4% |
| Latin
America |
1,108 |
1,028 |
+9.5% |
-1.8% |
+7.7% |
|
Total |
17,390 |
16,194 |
+4.4% |
+3.0% |
+7.4% |
* 2018 information has been restated following
the application of IFRS 16 Leases.
North America
In North America revenue increased by 8.5% to
Euro 9,154 million (+3.1% at constant exchange rates2).
The Lenses & Optical instruments division
posted another strong full year through a continued focus on its go
to market strategy in the core United States lens business along
with strong e-commerce growth. The lens strategy in the United
States, led by key brands and innovation, partnerships with
Independent Eyecare Professionals (ECP) and key accounts, continued
to deliver results. Performance was stronger in the second half
owing to the launch of Transitions® Signature® GEN 8™. Full year
2019 growth was further boosted by robust engagement with Luxottica
both for select key accounts and sales of value added lenses though
the Group’s retail channels. Canada and sales of Transitions to
other lens casters were headwinds while contact lens distribution
activities added to growth. Trends were strong in Sunglasses &
Readers. Costa made further inroads with Eyecare professionals as
well as in sporting goods stores and online channels, while
increasing its presence in the United States. The brand notably
solidified its leadership in fishing stores, selling to fishing
enthusiasts and those living near beaches, lakes and rivers. Late
in 2019, Costa started being integrated into the Luxottica
portfolio, which should help this young brand expand its global
footprint more quickly and benefit from significant synergies,
given Luxottica’s expertise in sunwear. In addition, strong market
demand for readers and sunglasses allowed FGX International to make
up in the second half for the impact of a demanding comparison
basis in the first six months. It continued to diversify its
distribution network in the United States and to expand its
international and online operations.The Equipment division posted a
modest decline for the year, owing mainly to softer fourth quarter
dynamics, as key customers work to absorb capacity from recent
investment programs.
In North America, Luxottica posted its best year
since 2015 in terms of sales growth with Wholesale and Retail both
accelerating in the fourth quarter. The growth in Wholesale was
reinforced by the solid performance in the independent, department
store and the third-party e-commerce channels. The Retail business
had a strong year with Target Optical and EyeMed leading the way at
double-digit sales growth. Sunglass Hut posted positive performance
building on a winning omnichannel proposition, further articulated
and resonating well with its customers. LensCrafters closed the
year on a positive note benefitting from an expanding store
remodeling program and a favorable price-mix boosted by a higher
penetration of value-added lenses. The crisis of Sears had a
significant impact on the overall performance of the Retail
business leading to the decision to exit the banner by the end
January 2020. The proprietary e-commerce platforms delivered
exceptional growth, with a further acceleration in the fourth
quarter. Oakley eyewear experienced a relevant uplift from the
partnership with the NFL (with its testimonial Patrick Mahomes
winning the Superbowl and the related MVP trophy), posting
mid-single digit growth in the second half of the year.
Europe
In Europe, revenue increased by 4.9% to Euro
4,236 million (+5.1% at constant exchange rates2).
Operating in a fiercely competitive environment,
the Lenses & Optical Instruments division demonstrated
resilience in France, the largest market in the region, and in all
Eastern European countries, particularly Poland and Russia. Gains
were driven by value-added lenses, especially progressive lenses.
Elsewhere in Europe, revenue was either flat or slightly lower.
Growth in E-commerce sales was satisfactory, especially for contact
lenses distributed through the VisionDirect website. The
Instruments business saw strong growth in 2019, fueled by the
launch and marketing of two major new products during the year:
Visioffice® X, a tool for personalizing lenses in optical stores,
and the Vision-R™ 800 phoropter. A world first, the latter
radically changes the eye exam process and customer experience,
allowing measurement up to 0.01 diopter versus 0.25 diopter with
other machines on the market. In addition to revolutionizing
optometry, the Vision-R™ 800 paves the way for ophthalmic lenses
with much greater accuracy.Within the Sunglasses & Readers
division, FGX International delivered robust sales, notably in the
United Kingdom and Germany.The Equipment division had a strong
finish to the year in the fourth quarter, following an exceptional
third quarter performance.
In 2019, Europe continued to contribute to the
overall Luxottica growth, with a positive evolution at both
Wholesale and Retail divisions, supported by best-selling
proprietary brands (also online) as well as main luxury licenses.
The Wholesale channel showed steadily growth over the year,
supported by volumes expansion. Among major countries, Italy,
Germany, Turkey and Eastern Europe outperformed other markets. The
successful development of the STARS program remains a key pillar of
Luxottica’s strategy, and currently represents over 20% of
Wholesale revenue in the region, showing a nice acceleration in the
last part of the year. Sales in Europe were also supported by the
growth around double-digit of the Retail division, on the back of
effective in-store execution empowering positive results in all
countries. Sunglass Hut confirmed its healthy growth trajectory,
growing at mid-single digit in comparable sales5 in Continental
Europe and with 21 successful new openings during the year. In
Italy, Salmoiraghi & Viganò, the leading multi-brand retailer
in the country, consolidated further its position, growing nicely
in both comparable sales5 and total revenues, also thanks to a
successful store renovation plan that will be carried forward in
2020 as well. Finally, Persol opened its first store in Europe (in
Milan).
Asia, Oceania and Africa
In Asia, Oceania and Africa, revenue increased
by 7.4% to Euro 2,892 million (+5.4% at constant exchange
rates2).
The Lenses & Optical Instruments division
was a major contributor to the regional performance. It delivered
double-digit growth in China, thanks to branded lenses (notably
EyezenTM, Crizal® and Varilux®), instruments, myopia control
solutions and innovation in the midrange. Good performances from
progressive and photochromic lenses have accelerated gains in South
Korea quarter after quarter, and kept momentum strong in Southeast
Asia. In India, promotional campaigns, online sales and innovative
business models for Base-of-Pyramid consumers only partially offset
the decline in sales through traditional distribution channels.
Revenue in Japan got a lift from value-added lenses and a series of
commercial successes with optical chains.The Sunglasses &
Readers division also saw double-digit revenue growth in the region
with excellent results at Xiamen Yarui Optical (BolonTM and
MolsionTM) in optical frames and robust online sales. The division
strengthened its positions in the Chinese sunwear market, its main
market in the region.The Equipment division posted solid growth as
market conditions in fast growing markets remained favorable.
2019 was positive for Luxottica in the region as
a whole, with growing sales at constant exchange rates2 in both
Wholesale and Retail divisions. The second half of the year
decelerated versus the first, particularly due to weaker Wholesale
in the third quarter (mostly reflecting political turmoil in Hong
Kong, dropping travel retail business and unfavorable weather
conditions in Japan), but turning positive in the fourth quarter.
Australia, Mainland China, South East Asia and Middle-East drove
the group’s performance in the area, more than balancing the
decline in Hong Kong and travel retail business, while Japan and
Korea closed the year at around the par. Wholesale growth was
basically driven by Mainland China, where the business restarted on
much cleaner basis. In Retail, Australia and New Zealand kept on a
nice growing trajectory in both optical at OPSM, posting the 14th
consecutive quarter of positive comps5/sales, and sun business at
SGH, consistently in terms of sales and comparable store sales5
growth, reaping the fruits of the store refurbishment program
carried out last year. Hong Kong retail remained negative, for the
fourth consecutive year.
Latin America
In Latin America, revenue increased by 7.7% to
Euro 1,108 million (+9.5% at constant exchange rates2).
The Lenses & Optical Instruments division
generated significantly improved growth at constant exchange rates2
for the full year 2019 when compared to 2018 consisting of balanced
growth in Brazil and Spanish speaking markets through most of the
year. 2019 was marked by several key initiatives including
marketing programs such as “Varilux® em Dobro” in Brazil, “Cambia
tu cara” in Colombia, and enhanced client marketing at Grupo Vision
in Costa Rica. The division also rolled out new technological
advances and product ranges to independent laboratories to further
support growth. After having bought the assets of the laboratory of
Devlyn Holdings, Essilor signed a supply contract with Opticas
Devlyn, the leading optical chain in Mexico, which boosted growth
in constant currency terms. In e-commerce, online sales in Brazil
continue to develop rapidly. Major strides were also made in
digital marketing with consumers in Mexico and Colombia now able to
access the Spanish-language edition of the eye care information
website “AllAboutVision.com”.The Sun & Readers division
contributed modestly to regional growth.The Equipment division was
a slight headwind to regional growth on a consolidated basis
despite solid underlying activity as market conditions in fast
growing markets remained favorable.
Luxottica continued to grow in Latin America
last year, expanding sales at constant exchange rates2 in both
Wholesale and Retail divisions. The second half of the year
slightly slowed down compared to the first, mostly due to a
weakening performance in the fourth quarter in Mexico. The key
market of Brazil kept the positive momentum it showed throughout
the entire year, made of high-single digit growth in Wholesale,
boosted by STARS and Óticas Carol (reaching 1,335 franchise
locations), as well as double-digit growth in Retail, primarily
sustained by SGH. GMO closed the year positive in sales and
comparable store sales5, absorbing the negative impact of the
protests in Chile and Ecuador in the last quarter.
Fourth-quarter 2019 revenue by operating
segment
|
In millions of Euros |
Q4 2019 |
Q4 2018
Restated* |
Change at constant rates2 |
Currency effect |
Change (reported) |
| Lenses &
Optical Instruments |
1,701 |
1,589 |
+5.2% |
+1.8% |
+7.0% |
| Sunglasses &
Readers |
242 |
214 |
+10.1% |
+2.8% |
+12.9% |
| Equipment |
70 |
73 |
-6.8% |
+2.1% |
-4.7% |
|
Essilor revenue |
2,012 |
1,876 |
+5.3% |
+2.0% |
+7.3% |
| Wholesale |
753 |
725 |
+2.4% |
+1.4% |
+3.8% |
| Retail |
1,539 |
1,439 |
+4.6% |
+2.3% |
+6.9% |
|
Luxottica revenue |
2,291 |
2,164 |
+3.9% |
+2.0% |
+5.9% |
|
Total |
4,304 |
4,040 |
+4.5% |
+2.0% |
+6.5% |
* 2018 information has been restated following
the application of IFRS 16 Leases.
EssilorLuxottica’s revenue increased by 4.5% at
constant exchange rates2 during the fourth quarter of 2019.
Fourth-quarter 2019 revenue by geographical
area
|
In millions of Euros |
Q4 2019 |
Q4 2018
Restated* |
Change at constant rates2 |
Currency effect |
Change (reported) |
| North America |
2,273 |
2,113 |
+4.3% |
+3.3% |
+7.6% |
| Europe |
971 |
918 |
+4.9% |
+0.8% |
+5.7% |
| Asia, Oceania and
Africa |
756 |
707 |
+5.0% |
+1.8% |
+6.8% |
| Latin America |
304 |
301 |
+3.8% |
-2.9% |
+0.9% |
|
Total |
4,304 |
4,040 |
+4.5% |
+2.0% |
+6.5% |
* 2018 information has been restated following
the application of IFRS 16 Leases.
North America
In North America, revenue increased by 7.6% to
Euro 2,273 million (+4.3% at constant exchange rates2).
The Lenses & Optical Instruments Division
benefitted from the continued momentum from the Transitions®
Signature® GEN 8™ launch, both with Independent Eyecare
Professionals and through the Company’s retail channels.
Robust growth continued with Alliance members and Essilor Experts
while key accounts expanded at a modest pace. Similar to the full
year trend, contact lens distribution activities contributed to
growth.Sunglasses & Readers performance in the United States
was driven primarily by FGX during the fourth quarter.Trends in the
Equipment division moderated after a particularly strong third
quarter and an elevated prior year comparison
base.
Both Luxottica divisions posted the best quarter of the year.
Wholesale grew high-single digit thanks to the sound execution
across all channels. The benefit from the consolidation of
Barberini weighted to a smaller extent. On the Retail side, sales
were up mid-single digit, led by LensCrafters delivering strong
results especially during the ramp up towards the end of the
insurance year. The performance at Sunglass Hut was mixed. The
brick and mortar stores were impacted by an unfavorable timeframe
of the holiday season and lower traffic in the touristic locations,
but the shortfall was made up online. Target Optical and EyeMed
confirmed their sound growth path, while Sears continued to be a
heavy drag. The direct e-commerce business had another exceptional
quarter growing at 27% at constant exchange rates2 and all major
websites contributed to the success.
Europe
In Europe revenue increased by 5.7% to Euro 971
million (+4.9% at constant exchange rates2).
The performance of the Lenses & Optical
Instruments in the quarter was driven by robust gains in Russia,
Turkey, Instruments and online sales of contact lens through
VisionDirect.The Equipment division continued its strong
performance in the fourth quarter, ending the year sharply
higher.
Luxottica’s turnover in Europe kept expanding in
the last quarter of the year. The Wholesale division saw robust
trends in particular in Spain, Portugal, Greece, UK, Turkey and
Eastern Europe. Performance of the sun category stood out in the
fourth quarter. The company continued to develop its STARS program,
thanks to top key accounts, and related turnover experiencing a
further acceleration, up by more than 50% compared to the fourth
quarter of last year. Retail sales increased soundly in the quarter
in high-single digit area, posting its 24th consecutive quarter of
turnover expansion. All major countries showed a positive evolution
in the division, led by Sunglass Hut in Continental Europe and
Salmoiraghi & Viganò in Italy.
Asia, Oceania and Africa
In Asia, Oceania and Africa revenue increased by
6.8% to Euro 756 million (+5.0% at constant exchange rates2).
The Lenses & Optical Instruments division
delivered strong in the region, with business up sharply in China,
South Korea, Southeast Asia and Japan. Growth was fueled by
value-added lenses in all countries.The Sunglasses & Readers
division continued to benefit from its expansion in optical frames
and online sales, primarily in China.Following an exceptional
performance through the first nine months of the year, the
Equipment division slowed down during the fourth quarter.
Luxottica’s regional sales accelerated in the
fourth versus the third quarter, driven by Australia, Mainland
China and South East Asia. Australia and New Zealand retail gained
further momentum, even amid wildfires emergency, with the optical
business recording the 14th consecutive quarter of positive sales,
also helped by refurbishments, and the sun business contributing as
well, both positive in comparable store sales5. Mainland China
speeded up at double-digit pace, fueled by both revamped Wholesale
and positive Retail in sales and comparable store sales5. On the
opposite, Hong Kong did not improve, deteriorating further in
Retail sales and comparable store sales5. Ray-Ban mono-brand store
roll-out made further progress last year in the region, focused on
Mainland China which reached 141 locations at the end of December,
out of a total 171 in the whole Asia-Pacific area.
Latin America
In Latin America, revenue increased by 0.9% to
Euro 304 million (+3.8% at constant exchange rates2).
Growth in the Lenses & Optical Instruments
division remained in double digits at constant exchange rates2
through a mix of strong underlying trends and new partnerships. In
Brazil, the solid dynamics through the first nine months eased as
the focus shifted to the Transitions® Signature® GEN 8™ launch
anticipated in the earlier part of 2020. E-commerce activity in
Brazil supported regional growth. Elsewhere in the region growth
was supported by continued market development and improved product
mix, which more than offset economic headwinds in select markets,
notably Chile and Colombia. Recently formed partnerships
contributed to growth at constant exchange rates2, particularly in
Mexico where sales expanded at a double-digit rate during the
fourth quarter. The Sunglasses & Readers division contributed
modestly to regional growth during the quarter.
For Luxottica, in the fourth quarter the still
sound performance of Brazil was counterbalanced by weakening result
of Mexico, all in all ending up in flattish sales at constant
exchange rates2 in the region. Brazil confirmed sound performance
in the fourth quarter, even accelerating in retail sales at
constant exchange rates2, essentially boosted by SGH comparable
store sales5. On the opposite, after a positive first half of the
year, the Mexican wholesale business started deteriorating in the
third quarter and failed to recover in the final three months,
mostly due to the poor performance of independents and key
accounts. The abovementioned political unrests in Chile and Ecuador
affected the sales performance of GMO in the last quarter of the
year, negative in sales and comparable store sales5.
Eliminating poor vision around the world
Essilor has created more than 15,000 inclusive
businesses worldwide since 2013, which have the potential to give
more than 300 million people access to vision health. These access
points delivered vision solutions to 10.7 million new eyeglass
wearers in 2019 alone, bringing the total for the past seven years
to 33.5 million.These efforts earned EssilorLuxottica the 17th spot
in Fortune Magazine’s annual Change the World list in 2019. The
ranking was recognition of the company’s commitment to bring good
vision to everyone everywhere and eliminate poor vision around the
world as part of its mission to “see more, be more and live life to
its fullest”. In this same spirit of raising awareness on good
vision, Essilor made presentations in different parts of the world
to leverage the report it published on the sidelines of the last
United Nations General Assembly session, entitled “Eliminating Poor
Vision in a Generation: What will it take to eliminate uncorrected
refractive errors by 2050?”. The report quantifies the scale of
uncorrected poor vision in the world and recommends a cumulative
investment of $14 billion over the next 30 years to eliminate
it.
Over the course of 2019, Essilor worked toward
this goal through partnerships to eliminate poor vision in many
regions. In Bhutan, 30,000 pairs of glasses have been delivered to
date to make this country the first in the world to eliminate poor
vision. In India, more than 143,000 people were screened to put the
Doddaballapura region on track to be the first in the country to
also eliminate poor vision by 2021. In Nepal, the company signed a
letter of intent to provide access to eye care to the 350,000
residents of the Bhaktapur district. And in China, Essilor worked
with the Huoqiu County to eliminate poor vision in the county
within three years. Partnerships were also launched with
governmental ministries in France, Kenya and India to promote eye
exams and raise awareness about the importance of visual health in
schools or among underprivileged children. Lastly, Essilor put its
culture of innovation to work for Base of Pyramid consumers in
2019: it developed new refraction technologies to make eye
screening available to all, and launched the new “Ready2Clip
Generation II” prescription glasses that can be dispensed on the
spot.This strong dynamic continued in the first few months of 2020.
In January, Essilor’s flagship inclusive business program Eye
MitraTM – the world’s largest rural optical network – was featured
at the World Economic Forum in Davos in a newly launched report
called “Business as Unusual”. And in February, Essilor pledged to
donate 1 million eyeglasses and sunglasses to the United Nations
Road Safety Fund (UNSRF). This partnership promotes global action
on good vision for road users while contributing to the United
Nations’ Sustainable Development Goals.
EssilorLuxottica consolidated statement
of profit or loss
|
In millions of Euros |
2019 |
2018 Restated* |
Change |
|
Revenue |
17,390 |
10,833 |
60.5% |
| Cost of
sales |
(6,573) |
(3,961) |
65.9% |
|
Gross profit |
10,817 |
6,872 |
57.4% |
| % of
revenue |
62.2% |
63.4% |
|
|
Total operating expenses |
(9,138) |
(5,473) |
67.0% |
|
Operating profit |
1,678 |
1,399 |
20.0% |
| % of
revenue |
9.7% |
12.9% |
|
|
Profit before taxes |
1,534 |
1,289 |
19.0% |
| % of
revenue |
8.8% |
11.9% |
|
| Income
taxes |
(350) |
(139) |
150.9% |
|
Effective tax rate |
22.8% |
10.8% |
|
|
Net Profit |
1,185 |
1,150 |
3.0% |
|
Net profit attributable to owners of the
parent |
1,077 |
1,083 |
-0.6% |
* 2018 information has been restated following
the application of IFRS 16 Leases, as well as to reflect the
finalization of the purchase price allocation (“PPA”) related to
the EL Combination.
The comparability in 2019 consolidated financial
statements is still affected by the EL Combination which occurred
on October 1, 2018. Since this transaction has been considered a
reverse acquisition according to the requirements of IFRS 3
Business Combinations, the consolidated financial statements
reflect the following structure:
|
Statements |
Year endedDecember 31, 2019 |
Year endedDecember 31, 2018 |
|
Profit or loss |
EssilorLuxottica’s12 months(Jan-Dec) |
Luxottica’s12 months(Jan-Dec) * |
Essilor’s3 months(Oct-Dec) * |
|
Financial position |
EssilorLuxottica’shistorical cost |
EssilorLuxottica’shistorical cost * |
* 2018 information has been restated following
the application of IFRS 16 Leases, as well as to reflect the
finalization of the purchase price allocation (“PPA”) related to
the EL Combination.
- Revenue showed a 60.5% growth mainly due to the
contribution of Essilor revenue amounting to Euro 5,885 million for
the first nine months of 2019;
- Operating profit grew by 20.0% primarily because of the
contribution of Essilor which, however, is affected by the
depreciation and amortization resulting from the recognition of
tangible and intangible assets following the purchase price
allocation related to the EL Combination (Euro 747 million).
Moreover, 2019 performance is also affected by the impact of the
fraudulent financial activities discovered at an Essilor plant in
Thailand recorded for an amount of Euro 185 million including
foreign exchanges effects.
- Net profit grew by 3% essentially due to the contribution
of Essilor, as described above. 2019 Net profit has also been
affected by the recognition of deferred tax assets (approx. Euro 30
million), following the merger of the Group’s Canadian entities as
part of the integration activities, and by a tax reimbursement
resulting from a positive pronouncement of the Italian tax
authority (Euro 29 million).
EssilorLuxottica consolidated statement
of profit or loss: reconciliation with adjusted6
figures
Year ended December 31, 2019
|
In millions of Euros |
2019 |
Adjustments related to PPA impacts |
Other non-GAAP adjustments |
2019Adjusted6 |
|
Revenue |
17,390 |
- |
- |
17,390 |
| Cost of
sales |
(6,573) |
61 |
8 |
(6,503) |
|
Gross profit |
10,817 |
61 |
8 |
10,887 |
| % of
revenue |
62.2% |
|
|
62.6% |
|
Total operating expenses |
(9,138) |
669 |
395 |
(8,074) |
|
Operating profit |
1,678 |
730 |
404 |
2,812 |
|
% of revenue |
9.7% |
|
|
16.2% |
| Cost of
net debt |
(117) |
(7) |
9 |
(115) |
| Other
financial income / (expenses)* |
(27) |
- |
1 |
(26) |
|
Profit before taxes |
1,534 |
723 |
414 |
2,672 |
| % of
revenue |
8.8% |
|
|
15.4% |
| Income
taxes |
(350) |
(142) |
(126) |
(618) |
|
Net Profit |
1,185 |
581 |
288 |
2,054 |
|
Net profit attributable to owners of the
parent |
1,077 |
|
|
1,938 |
* Including Share of profit of associates.
Year ended December 31, 2018
|
In millions of Euros |
2018 Restated*Pro
forma1
information** |
Adjustments related to PPA impacts |
Other non-GAAP adjustments |
2018 Restated*Pro
forma1Adjusted6 |
|
Revenue |
16,194 |
- |
- |
16,194 |
| Cost of
sales |
(6,131) |
119 |
27 |
(5,985) |
|
Gross profit |
10,063 |
119 |
27 |
10,209 |
| % of
revenue |
62.1% |
|
|
63.0% |
|
Total operating expenses |
(8,552) |
639 |
322 |
(7,591) |
|
Operating profit |
1,511 |
758 |
349 |
2,618 |
|
% of revenue |
9.3% |
|
|
16.2% |
| Cost of
net debt |
(148) |
(6) |
5 |
(149) |
| Other
financial income / (expenses)*** |
(11) |
- |
- |
(11) |
|
Profit before taxes |
1,352 |
752 |
354 |
2,458 |
| % of
revenue |
8.3% |
|
|
15.2% |
| Income
taxes |
(221) |
(297) |
(74) |
(593) |
|
Net Profit |
1,131 |
455 |
279 |
1,866 |
|
Net profit attributable to owners of the
parent |
n.a. |
|
|
1,774 |
* 2018 information has been restated following
the application of IFRS 16 Leases, as well as to reflect the
finalization of the purchase price allocation (“PPA”) related to
the EL Combination.** Reconciliation from Reported to Pro forma1
2018 statement of profit or loss is available in the Appendix.***
Including Share of profit of associates.
Adjusted6 measures
In this document, management presented certain
performance indicators that are not envisioned by the International
Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board and endorsed by the
European Union. Such measures are not meant to be considered in
isolation or as a substitute for items appearing in
EssilorLuxottica consolidated financial statements prepared in
accordance with IFRS. Rather, these non-IFRS measures should be
used as a supplement to IFRS results to assist the reader in better
understanding the operating performance of the Group and should be
read in conjunction with EssilorLuxottica consolidated financial
statements. Such measures are not defined terms under IFRS and
their definitions should be carefully reviewed and understood by
investors.
The combination of Essilor and Luxottica (the
“EL Combination”), as well as events that are unusual, infrequent
or unrelated to normal operations, have a significant impact on the
consolidated results. Accordingly, in order to provide additional
comparative information on the results for the period under review
compared to previous periods, to reflect the EssilorLuxottica
actual economic performance and enable it to be monitored and
benchmarked against competitors, some measures have been adjusted
(“adjusted measures”). In particular, management adjusted the
following measures: Gross profit, Operating expenses, Operating
profit, Profit before taxes and Net profit. Such adjusted measures
are reconciled to their most comparable pro forma1 measures in the
Restated Unaudited Pro Forma Consolidated Financial Information for
the year ended December 31, 2018, and to the most comparable
reported measures in the consolidated statement of profit or loss
for the year ended December 31, 2019.
In 2018 and 2019, adjusted measures exclude: (i)
the incremental impacts of the purchase price allocations related
to the EL Combination; and (ii) other adjustments related to
transactions that are unusual, infrequent or unrelated to normal
operations, as the impact of these events might affect the
understanding of the Group’s performance. These adjustments are
described below.
Year ended December 31, 2019
- Non-recurring Cost of sales for Euro 8 million mainly
associated with restructuring and reorganization expenses incurred
with respect to projects aimed at the optimization of the central
warehouses of the Group and the costs of Luxottica’s restricted
shares plan (LTI) for employees working for operations
activities.
- Non-recurring Selling expenses for Euro 30 million mainly
associated with the closing of the US retail chain Sears Optical,
announced by the Group in December 2019.
- Non-recurring General and administrative expenses for Euro 199
million associated with the following impacts:
- non-recurring costs related to restructuring and reorganization
projects aiming at increasing the Group’s operational and
organizational efficiency for Euro 71 million; the non-recurring
costs mainly refer to severance, accelerated depreciation and
write-off;
- non-recurring expenses related to M&A projects for Euro 21
million mainly linked to the transactions costs incurred in
connection with GrandVision N. V. proposed acquisition announced on
July 31, 2019, and to the acquisition of Barberini completed in
August 2019;
- one-off costs incurred by the Group for Euro 36 million,
including transaction costs linked to the finalization of the MTO
and delisting of Luxottica shares and other one-off integration
costs;
- expenses related to share-based payments for about Euro 65
million linked to the removal of the performance conditions from
the 2015 and 2016 Essilor’s share-based plans, the international
employee shareholding plan extended to Luxottica employees in late
2019 and to Luxottica’s restricted shares plan (LTI);
- non-recurring expenses for Euro 6 million incurred in
connection with the settlement of a commercial litigation.
- Non-recurring Other income / (expenses) are adjusted for Euro
166 million corresponding to the following impacts:
- non-recurring loss related to the fraudulent financial
activities in a plant in Thailand for an amount of Euro 185 million
(including foreign exchanges impacts);
- non-recurring costs related to M&A and divestment
transactions for Euro 22 million mainly related the loss resulting
from the sale of Merve as a condition required by the Turkish
anti-trust authorities to approve the combination of Essilor and
Luxottica for Euro 14 million, as well as a non-recurring impact on
final deferred payments paid on various past acquisitions;
- net negative impact of Euro 5 million related to other
non-recurring transactions linked to significant claims and
litigations; and
- the elimination of a non-recurring net gain for Euro 46 million
mainly related to the profit recorded from the sale of the Group’s
25% ownership in a US based entity and the sale of another
investment.
- Cost of net debt is adjusted for Euro 9 million corresponding
mainly to non-recurring financial expenses linked to early
repayment of debt at Luxottica level in the context of the
restructuring and centralization of financial debt at
EssilorLuxottica level.
- Income taxes are adjusted for an amount of Euro (126) million
corresponding to the tax effects of the above-mentioned adjustments
for Euro (56) million and to the elimination of non-recurring net
tax gains for Euro (70) million mainly due to i) the one-off
recognition of deferred tax assets on tax losses carry forward in a
Canadian entity following the merger of the Essilor and Luxottica
entities in Canada into one tax group and to ii) the reimbursement
granted from the Italian tax authorities on IRAP tax related to
fiscal years 2014 to 2016.
Year
ended December 31, 2018
- Non-recurring Cost of sales for Euro 27 million associated with
restructuring and reorganization projects mainly linked to
initiatives aimed at transforming the Group’s distributive network
(i.e. centralization of the Group warehouses removing stock in
store; closing down some local warehouses) as well as those related
to a change in the Group business model (e.g. removal of lenses
laboratories from the stores). In particular, the expenses adjusted
in 2018 consist of write-off of the equipment and stock affected by
those restructuring and reorganization projects, as well as the
related logistic costs incurred.
- Non-recurring Selling expenses for a net cost of Euro 7 million
resulting from an impairment loss recorded on specific brands, as
well as from some projects aimed at transforming significantly the
Group’s sales force organization.
- Non-recurring General and administrative expenses for Euro 278
million associated with the following impacts:
- total transaction costs related to the combination of Essilor
and Luxottica for Euro 158 million (of which Euro 128 million
incurred in 2017, Euro 22 million incurred in 2018 and Euro 8
million in 2019);
- non-recurring costs of Euro 77 million mainly linked to the
removal of the performance conditions from the 2015 and 2016
share-based plans authorized by the Essilor Annual General Meeting
of May 2017, less Euro 5 million adjustment related to the
valuation of Essilor’s share-based payments;
- restructuring and reorganization expenses for Euro 48
million.
- Non-recurring expenses for Euro 36 million accounted for in
Other income / (expenses) including:
- loss on assets disposal for Euro 5 million following the
request from the Turkish Antitrust authorities to divest Merve as a
condition precedent to approve the combination of Essilor and
Luxottica;
- net loss impact of the change in consolidation scope of one
entity for Euro 24 million;
- net negative impact of Euro 5 million related to other
non-recurring transactions mainly linked to significant claims and
litigations; and
- distribution of exceptional bonuses to French employees for
Euro 2 million.
- Cost of net debt is adjusted for Euro 5 million corresponding
to a non-recurring financial expense linked to early repayment of
debt.
- Income taxes are adjusted for an amount of Euro (74) million
corresponding to the tax effect of the above-mentioned adjustments
for Euro (27) million and to a non-recurring tax income of Euro
(47) million.
Other non-GAAP measures
Other non-GAAP measures such as EBITDA, Free
Cash Flows, Net Debt and the ratio Net Debt to EBITDA are also
included in this document in order to:
- improve transparency for investors;
- assist investors in their assessment of the Group’s operating
performance and its ability to refinance its debt as it matures and
incur additional indebtedness to invest in new business
opportunities;
- assist investors in their assessment of the Group’s cost of
debt;
- ensure that these measures are fully understood in light of how
the Group evaluates its operating results and leverage;
- properly define the metrics used and confirm their calculation;
and
- share these measures with all investors at the same time.
Those other non-GAAP measures are not meant to
be considered in isolation or as a substitute for items appearing
in EssilorLuxottica’s consolidated financial statements prepared in
accordance with IFRS. Rather, these other non-GAAP measures should
be used as a supplement to IFRS results to assist the reader in
better understanding the operating performance of the Group.
Moreover, investors should be aware that the Group's method of
calculating those non-GAAP measures may differ from that used by
other companies.
The following table provides a reconciliation of
those non-GAAP measures to the most directly comparable IFRS
financial measures.
|
|
2019 |
|
|
|
|
Net cash flow provided by operating activities (a) |
3,299 |
|
Purchase of property, plant and equipment and intangible
assets (a) |
(903) |
|
Cash payments for the principal portion of lease liabilities
(a) |
(571) |
|
Free Cash Flow |
1,825 |
|
|
|
|
Operating profit (b) |
1,678 |
|
Depreciation and amortization (a) |
2,121 |
|
EBITDA |
3,800 |
|
|
|
|
Net Debt (c) |
4,046 |
|
|
|
|
Net Debt / EBITDA |
1.1 |
(a) As presented in the consolidated statement of cash flows.(b)
As presented in the consolidated statement of profit or loss.(c)
Net Debt is presented in the Note 22 - Financial debt, including
lease liabilities to the consolidated financial statements; its
components are also reported in the paragraph Consolidated
statement of financial position, Net Debt and cash flow.
Adjusted6 consolidated statement of profit or
loss
|
In millions of Euros |
2019 |
2018 Restated* Pro
forma1 |
Change |
Change at constantexchange
rates2 |
|
|
|
|
|
|
|
Revenue |
17,390 |
16,194 |
7.4% |
4.4% |
| Cost of
sales |
(6,503) |
(5,985) |
8.7% |
5.9% |
|
Gross profit |
10,887 |
10,209 |
6.6% |
3.5% |
| % of
revenue |
62.6% |
63.0% |
|
|
| Research
and development |
(291) |
(275) |
5.9% |
3.5% |
|
Selling |
(4,595) |
(4,308) |
6.7% |
3.6% |
|
Royalties |
(168) |
(163) |
2.7% |
-0.2% |
|
Advertising and marketing |
(1,236) |
(1,115) |
10.8% |
7.9% |
| General
and administrative |
(1,777) |
(1,719) |
3.4% |
1.1% |
| Other
income / (expenses) |
(8) |
(11) |
-22.5% |
-33.1% |
|
Total operating expenses |
(8,074) |
(7,591) |
6.4% |
3.5% |
|
Operating profit |
2,812 |
2,618 |
7.4% |
3.3% |
| % of
revenue |
16.2% |
16.2% |
|
|
| Cost of
net debt |
(115) |
(149) |
-23.1% |
-24.0% |
| Other
financial income / (expenses) |
(24) |
(11) |
|
|
| Share of
profits of associates |
(2) |
- |
|
|
|
Profit before taxes |
2,672 |
2,458 |
8.7% |
4.6% |
| % of
revenue |
15.4% |
15.2% |
|
|
| Income
taxes |
(618) |
(593) |
4.3% |
0.8% |
|
Effective tax rate |
23.1% |
24.1% |
|
|
|
Net Profit |
2,054 |
1,866 |
10.1% |
5.7% |
|
Net profit attributable to owners of the
parent |
1,938 |
1,774 |
9.2% |
4.8% |
* 2018 information has been restated following
the application of IFRS 16 Leases, as well as to reflect the
finalization of the purchase price allocation (“PPA”) related to
the EL Combination.
Revenue for the year totaled
Euro 17,390 million, an increase of 7.4% in current exchange rates
and 4.4% in constant exchange rates2 when compared to 2018.
Adjusted6 Gross
profit: +6.6% at current exchange rates and 3.5% at constant
exchange rates2
Adjusted6 Gross profit in 2019 ended at Euro
10,887 million, representing 62.6% of revenue versus 63.0% in 2018.
The gross margin at Luxottica was broadly stable, despite the
slight dilution generated by the fast-growing managed vision care
business. On the Essilor side, the positive effect from the
Transitions Generation 8 launch was more than offset by portfolio
mix effects stemming from faster growth in online contact lens
sales and Sunglasses & Readers as well as a negative impact
from the obsolescence of the Transitions Generation 7 product.
Adjusted6 Operating
expenses: +6.4% at current exchange rates and +3.5% at constant
exchange rates2Operating expenses
amounted to Euro 8,074 million in 2019, translating to 46.4% of
sales compared to 46.9% in the prior year and reflecting:
- Research and development costs of Euro 291 million, as the
Group continues to invest the same portion of its revenue behind
innovation.
- Selling costs of Euro 4,595 million to support
EssilorLuxottica’s top line growth, positively impacted by the
winding down of legacy operations at Sears Optical Retail.
- Royalties of Euro 168 million, related to the Group’s licensed
frame brands.
- Advertising and marketing costs of Euro 1,236 million included
the impact of investments to drive future growth. This included a
renewed effort in marketing campaigns on lens brands, e-commerce,
Sunglasses & Readers, the Transitions Generation 8 launch and
activities to develop the myopia segment. The Group also launched
new campaigns and partnerships for its top brands in frames and
retail banners (Sunglass Hut returning to television after three
years, Oakley becoming an official sponsor to the NFL and Ray-Ban
launching a successful Sun Campaign).
- General and administrative costs totaled Euro 1,777 million
reflecting EssilorLuxottica’s strong cost control measures,
particularly effective during the second half of the year.
Adjusted6 Operating profit: +7.4% at
current exchange rates and +3.3% at constant exchange
rates2The Group posted an adjusted6 Operating profit of
Euro 2,812 million, representing 16.2% of sales, in line compared
to 2018.
Adjusted6 Cost of net debt, Other
financial income / (expenses) and Share of profits of
associates
The adjusted6 Cost of net debt declined to Euro
115 million in 2019 from Euro 149 million due to a decrease in the
Company’s financing cost and despite an exceptional cash
disbursement to complete EssilorLuxottica’s Mandatory Tender Offer
for Luxottica shares. The issuance of the Euro 5 billion bond in
November did not have a material impact in 2019. Other financial
expenses amounted to Euro 24 million and Share of profits of
associates showed a loss of Euro 2 million.
Adjusted6 Income
taxes
EssilorLuxottica reported adjusted6 tax expense
of Euro 618 million, reflecting an adjusted6 tax rate of 23.1% for
2019 compared to an adjusted6 tax rate of 24.1% in the prior year
resulting from a more favorable geographical mix of earnings and
from a positive closing of certain tax audits.
Adjusted6 net profit
attributable to owners of the parent: +9.2% at current
exchange rates and 4.8% at constant exchange rates2.
Consolidated statement of financial
position, Net Debt and cash flow
Condensed consolidated statement of
financial position
|
In millions of Euros |
Dec. 31, 2019 |
Dec. 31, 2018* |
Change |
|
In millions of Euros |
Dec. 31, 2019 |
Dec. 31, 2018* |
Change |
| |
|
|
|
|
|
|
|
|
| Goodwill |
24,074 |
23,486 |
588 |
|
Equity |
35,332 |
33,403 |
1,929 |
| Intangible, Tangible and
Right-of-use |
16,934 |
17,143 |
(209) |
|
Non-current borrowings and lease
liabilities |
8,484 |
4,045 |
4,439 |
| Other
non-current assets |
825 |
762 |
63 |
|
Other
non-current liabilities |
3,150 |
3,477 |
(327) |
| Non-current
assets |
41,833 |
41,391 |
442 |
|
Equity and non-current
liabilities |
46,966 |
40,925 |
6,041 |
| |
|
|
|
|
|
|
|
|
| Inventories, Trade receivables |
4,578 |
4,382 |
196 |
|
Short-term borrowings and lease
liabilities |
932 |
1,657 |
(725) |
| Other current assets |
1,336 |
782 |
554 |
|
Trade payables |
1,770 |
1,744 |
26 |
| Cash
and cash equivalents |
4,836 |
1,829 |
3,007 |
|
Other
current liabilities |
2,915 |
4,072 |
(1,157) |
| Current assets |
10,750 |
6,993 |
3,757 |
|
Current
liabilities |
5,617 |
7,473 |
(1,856) |
| Assets held for sale |
0 |
14 |
(14) |
|
|
|
|
|
|
ASSETS |
52,583 |
48,398 |
4,185 |
|
EQUITY and LIABILITIES |
52,583 |
48,398 |
4,185 |
* 2018 information has been restated following
the application of IFRS 16 Leases, as well as to reflect the
finalization of the purchase price allocation (“PPA”) related to
the EL Combination.
Goodwill increased by Euro 588 million, of which
Euro 206 million resulting from acquisitions made in 2019, and Euro
382 million resulting from foreign currency fluctuations (including
foreign currency fluctuations on the goodwill arising from the
EssilorLuxottica Combination, amounting to Euro 333 million).
Intangible, Tangible and Right-of-use are mainly
related to intangible assets recognized as part of the purchase
price allocation finalized on the EssilorLuxottica Combination for
around Euro 11 billion and to the right-of-use assets recognized
following the implementation of the new accounting standard IFRS 16
Leases.
The overall increase in Cash and cash
equivalents and Other current assets are mainly linked to the
proceeds from the issuance of the 5 billion bonds occurred in
November 2019 (as described in paragraph 1.2.2).
Equity increased mainly for the result of the
year (Euro 1,670 million including other comprehensive income
items), the share capital increases related to the sell-out and
squeeze-out procedures on Luxottica shares, as described in
paragraph 1.2.2 – Significant Events (Euro 1,019 million) and the
share-based payments accounted for in 2019 (Euro 154 million),
while decreased by Euro 959 million following dividend
distribution.
Other current liabilities decreased by Euro
1,157 million, of which 1,667 million are link to the short-term
put option representing EssilorLuxottica’s obligation to purchase
against cash all Luxottica shares not already held by the Group as
of December 31, 2018. During the first months of 2019, as a result
of the finalization of the sell-out and squeeze-out procedures, the
Group incurred a total cash-out of Euro 641 million towards those
Luxottica shareholders that tendered their shares against cash and
consequently reversed the put liability accounted for as of
December 31, 2018.
Net DebtGroup Net Debt
(excluding lease liabilities) amounted to Euro 1,898 million at the
end of December 2019, an increase of Euro 11 million compared to
the restated Net Debt position at the end of December 2018.
|
In millions of Euros |
December 31, 2019 |
December 31, 2018 * |
| Non-current
borrowings |
6,864 |
2,564 |
|
Current borrowings |
403 |
1,176 |
| TOTAL
Liabilities |
7,268 |
3,740 |
|
Short-term investments |
(500) |
- |
|
Cash and cash equivalents |
(4,836) |
(1,829) |
| TOTAL
Asset |
(5,336) |
(1,829) |
|
Interest Rate Swap measured at fair value |
(34) |
(25) |
|
NET DEBT excluding Lease liabilities |
1,898 |
1,887 |
|
Lease liabilities (current and non-current) |
2,148 |
1,962 |
|
NET DEBT |
4,046 |
3,849 |
* 2018 information has been restated following
the application of IFRS 16 Leases, as well as to reflect the
finalization of the purchase price allocation (“PPA”) related to
the EL Combination.
Cash Flow
Operating cash-flow before changes in working
capital amounted to Euro 3,351 in 2019.Changes in working capital
requirement amounted to Euro 52 million against Operating
cash-flow.Capital expenditures amounted to Euro 903 million,
representing 5.2% of Group’s revenue.The Free Cash Flow7 normalized
for IFRS 16 impacts amounted to Euro 1,825 million.
|
In millions of Euros |
|
|
|
|
Net cash from operations (before change in WCR(a)) |
3,351 |
Change in WCR(a) |
52 |
|
Proceeds from share capital increase |
32 |
Capital expenditure |
903 |
|
Change in Net Debt (excluding lease liabilities) |
11 |
Cash payments for lease liabilities |
571 |
|
Other |
21 |
Dividends |
959 |
|
|
|
Acquisition and other investments, net of disposals(b) |
289 |
|
|
|
Cash portion of MTO |
641 |
- Working capital requirement.
- Financial investments net of cash acquired, plus debt of
newly-consolidated companies.
Investments made and planned for
2020
|
In millions of Euros |
EssilorLuxottica |
Essilor |
Luxottica |
|
2019 |
2018 |
2017 |
2018 |
2017 |
| Property, plant
and equipment and intangible assets (gross of disposals) |
903 |
334 |
308 |
593 |
666 |
| Depreciation and
amortization |
2,121 |
361 |
375 |
515 |
541 |
| Financial
investments net of cash acquired |
370 |
270 |
334 |
19 |
136 |
|
Purchase of treasury shares |
0 |
0 |
0 |
0 |
0 |
Capital expenditure In the
industrial sector, cash out related to capital expenditures
amounted to Euro 903 million in 2019, 5.2% of net sales, compared
to Euro 927 million in the previous year. 2018 was characterized by
one-off investments for the new Logistics plant in Italy, the
remaining portion of recurring investment is growing to support the
group’s growth in the areas of IT and the development of the retail
network.
Financial investments Financial investments net of
cash acquired amounted to Euro 370 million in 2019, compared to
Euro 289 million in 2018. These investments include mainly the
effects of the business combinations completed in 2019, which
include mainly Barberini S.p.A., the world's leading optical glass
sun lens manufacturer, as well as the acquisitions of Brille 24 in
the online business, Devlyn in Mexico, Future in Sweden, and
Optimed in the instruments division. This also includes, to a
lesser extent, price supplements on acquisitions completed prior to
2019.
Main future investments In
2020, the Group will continue investing in production, development
of the retail network, integration activities, M&A and
partnerships projects.
Acquisitions and
partnerships
EssilorLuxottica completed 29 transactions in
2019, representing full-year revenue of close to Euro 218 million.
The major transactions are indicated in the table below.
|
Company |
Country |
Business |
Full-year revenue |
% held |
Consoli-dated from |
|
|
Wholesale |
|
Barberini |
Italy |
Optical glass sun lens manufacturer |
€85 million1 |
100% |
September 2019 |
|
|
Lenses & Optical Instruments – Latin
America |
|
Devlyn |
Mexico |
Integrated prescription laboratory operating optical stores |
€13 million |
100% |
July 2019 |
|
|
Sunglasses & Readers |
|
Future |
Sweden |
Distribution Sun & Readers |
€14 million |
100% |
November 2019 |
|
|
Online |
|
Brille 24 |
Germany |
Online
retail platform for optical products |
€25 million |
100% |
April 2019 |
|
|
Instruments |
|
Optimed |
Australia
& New Zealand |
Distribution of Ophthalmic Instruments |
€11 million |
75% |
September 2019 |
|
On December 5, 2019, EssilorLuxottica
announced the closing of the disposal of its 100% stake in
Merve Optik in Turkey. Merve is a leading turkish wholesaler of
sunglasses and optical frames with 5 proprietary brands (Ossé,
Mustang, Hawk, Optelli, Soleil) and 16 licensed brands from
Marcolin, generating a total of around Euro 19 million of revenue
in 2018. This divestment was a requirement from the Turkish
Competition Authority (TCA) as a remedy from the combination
between Essilor and Luxottica.
Subsequent events
GrandVisionThe European
Commission has initiated a Phase II review of the proposed
acquisition of GrandVision by EssilorLuxottica. The transaction has
been unconditionally cleared so far in the United States, Russia
and Colombia, and it is currently under review also in Brazil,
Chile, Mexico and Turkey.The Company is confident that Phase II
will be completed in a timely manner and will closely cooperate
with the European Commission to fully demonstrate the rationale of
the proposed acquisition and the benefits that it will bring to
customers, consumers and all the eyewear industry players. The
Company reaffirms the objective to close the transaction within 12
to 24 months from the announcement date, July 31, 2019, in
cooperation with the relevant authorities.
Optical HouseOn January 3,
2020, EssilorLuxottica completed the purchase of a 51% stake in
Optical House, the leader in the optical market in Ukraine. Optical
House operates through a network of around 190 stores under the
Luxoptica brand and is the country’s leading wholesale platform for
lenses, frames and contact lenses. In 2019, Optical House generated
around Euro 65 million of revenue.
COVID-19The current COVID-19
epidemic has a negative impact on the Company’s business in Greater
China, which represents approximately 5% of consolidated revenue.
So far, the virus has also slightly impacted the Company’s revenue
performance in other regions. At the current level, inventory is
sufficient to meet several weeks of demand.In terms of production,
EssilorLuxottica plants in China are currently operating at a
slightly reduced capacity which is quickly normalizing, while the
plants in Italy and all other locations are currently running at
full capacity. Contingency plans can be activated in case of a
protracted pandemic. They would aim at optimizing the Company’s
global infrastructure. EssilorLuxottica can rely on a worldwide
network of plants and laboratories, which allow flexibility and
continuity.
FraudOn December 30, 2019,
EssilorLuxottica announced that its subsidiary Essilor
International discovered fraudulent financial activities in one of
its plants in Thailand. Since then, Essilor International has
implemented a wide range of corrective measures under the
supervision of the EssilorLuxottica Board of Directors. A dedicated
team was set up, reporting to the CEO of Essilor International, to
take action in three key areas:
- Recovery of misappropriated funds: The company progressed with
freezing funds on different bank accounts in several jurisdictions.
It will likely take several months to effectively recover them.
Additional funds are currently being traced. All these measures are
aimed at reducing the overall financial impact for the Company,
from the Euro 185 million currently recorded in its accounts.
- Legal action: Criminal charges have been filed against the
perpetrators and beneficiaries of the fraud in jurisdictions, and
all legal options for holding the relevant third parties liable are
considered to allow the Company to obtain damages commensurate with
the injury suffered.
- Internal action: Internal controls and security measures have
been tightened across the global operations. Moreover, in the wake
of this incident, Essilor International reorganized its Treasury
and local management in Thailand.
Additional measures have been initiated and are
in the process of being implemented to enhance the Group’s control
environment. This has been defined as a priority and will be
monitored as such.
Management
ChangesEssilorLuxottica confirms that the search for a new
CEO is ongoing. It is now also considering internal
candidates. The final appointment is expected to be made by the end
of 2020.
David Wielemans is appointed co-CFO of
EssilorLuxottica alongside Stefano Grassi, in replacement of Hilary
Halper.
Ariel Bauer is appointed co-Head of Investor
Relations of EssilorLuxottica alongside Giorgio Iannella, in
replacement of Véronique Gillet.
Notes
1 Pro forma: the Restated
Unaudited Pro Forma Consolidated Financial Information has been
produced for illustrative purposes only, with the aim of providing
comparative information for the year ended December 31, 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
or income 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.
APPENDICES
EXCERPTS FROM THE RESTATED UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION
| |
|
2018 RESTATED |
| € millions |
|
EssilorLuxottica2018 P&LRestated |
Essilor 9m 2018 P&LRestated |
PPA adjustmentsJan. 1, 2018Sep. 30, 2018 |
Other adjustments |
EssilorLuxotticaPro forma Restated |
Elimination of 12 months PPA adjustments |
Other non-GAAP adjustments |
EssilorLuxottica Pro forma AdjustedRestated |
| Revenue |
|
10,833 |
5,537 |
- |
(176) |
16,194 |
- |
- |
16,194 |
| Cost of
sales |
|
(3,961) |
(2,286) |
(60) |
176 |
(6,131) |
119 |
27 |
(5,985) |
|
Gross profit |
|
6,872 |
3,251 |
(60) |
- |
10,063 |
119 |
27 |
10,209 |
| % of
revenue |
|
63.4% |
58.7% |
|
|
62.1% |
|
|
63.0% |
| Research and
development |
|
(190) |
(149) |
(193) |
- |
(531) |
257 |
- |
(275) |
| Selling |
|
(3,389) |
(997) |
(210) |
- |
(4,596) |
280 |
7 |
(4.308) |
| Royalties |
|
(157) |
(6) |
- |
- |
(163) |
- |
- |
(163) |
| Advertising
and marketing |
|
(745) |
(392) |
(68) |
- |
(1,206) |
91 |
- |
(1,115) |
| General and
administrative |
|
(987) |
(882) |
(8) |
(131) |
(2,008) |
11 |
278 |
(1,719) |
| Other income /
(expenses) |
|
(5) |
(42) |
- |
- |
(47) |
- |
36 |
(11) |
|
Total operating expenses |
|
(5,473) |
(2,468) |
(479) |
(131) |
(8.552) |
639 |
322 |
(7,591) |
|
Operating profit |
|
1,399 |
783 |
(539) |
(131) |
1,511 |
758 |
349 |
2,618 |
| % of
revenue |
|
12.9% |
14.1% |
|
|
9.3% |
|
|
16.2% |
| Cost of net
debt |
|
(100) |
(48) |
5 |
(5) |
(148) |
(6) |
5 |
(149) |
| Other
financial income / (expenses) |
|
(9) |
(7) |
- |
6 |
(11) |
- |
- |
(11) |
| Share of
profits of associates |
|
0 |
0 |
- |
(1) |
(0) |
- |
- |
(0) |
|
Profit before taxes |
|
1,289 |
728 |
(534) |
(131) |
1,352 |
752 |
354 |
2,458 |
| % of
revenue |
|
11.9% |
13.1% |
|
|
8.3% |
|
|
15.2% |
| Income
taxes |
|
(139) |
(214) |
106 |
27 |
(221) |
(297) |
(74) |
(593) |
| Effective tax
rate |
|
10.8% |
29.4% |
|
|
16.3% |
|
|
24.1% |
|
Net profit |
|
1,150 |
514 |
(428) |
(105) |
1.131 |
455 |
279 |
1.866 |
EXCERPTS FROM THE CONSOLIDATED GROUP FINANCIAL STATEMENTS
Consolidated statement of profit or loss
| |
|
|
|
€ millions |
2019 |
Restated2018 (a) |
| Revenue |
17,390 |
10,833 |
|
Cost of sales |
(6,573) |
(3,961) |
| GROSS
PROFIT |
10,817 |
6,872 |
| Research and
development |
(548) |
(190) |
| Selling |
(4,918) |
(3,389) |
| Royalties |
(168) |
(157) |
| Advertising and
marketing |
(1,331) |
(745) |
| General and
administrative |
(2,000) |
(987) |
| Other income /
(expenses) |
(174) |
(5) |
|
Total operating expenses |
(9,138) |
(5,473) |
|
OPERATING PROFIT |
1,678 |
1,399 |
| Cost of net
debt |
(117) |
(100) |
| Other financial
income / (expenses) |
(25) |
(9) |
|
Share of profits of associates |
(2) |
0 |
| PROFIT
BEFORE TAXES |
1,534 |
1,289 |
|
Income taxes |
(350) |
(139) |
| NET
PROFIT |
1,185 |
1,150 |
| Of which
attributable to: |
|
|
|
Owners of the parent |
1,077 |
1,083 |
|
Non-controlling interests |
108 |
67 |
| Weighted average
number of shares outstanding: |
|
|
|
Basic |
434,084,752 |
260,699,711 |
|
Diluted |
441,137,525 |
266,246,307 |
| Earnings per
share (EPS) for net profit attributable to owners of the
parent: |
|
|
|
Basic |
2.48 |
4.16 |
|
Diluted |
2.44 |
4.07 |
(a) The comparative period has been restated in
accordance with the transitional requirements of the initial
application of IFRS 16 – Leases, as well as to reflect the
finalization of the purchase price allocation (“PPA”) related to
the EL Combination.
Consolidated statement of financial
position
Assets
|
€ millions |
December 31, 2019 |
RestatedDecember 31, 2018
(a) |
| Goodwill |
24,074 |
23,486 |
| Intangible
assets |
11,300 |
11,975 |
| Property, plant
and equipment |
3,620 |
3,339 |
| Right-of-use
assets |
2,014 |
1,828 |
| Investments in
associates |
18 |
22 |
| Other
non-current assets |
378 |
399 |
|
Deferred tax assets |
429 |
341 |
| TOTAL
NON-CURRENT ASSETS |
41,833 |
41,391 |
| Inventories |
2,166 |
2,034 |
| Trade
receivables |
2,411 |
2,348 |
| Tax
receivables |
94 |
128 |
| Other current
assets |
1,243 |
655 |
|
Cash and cash equivalents |
4,836 |
1,829 |
| TOTAL
CURRENT ASSETS |
10,750 |
6,993 |
|
Assets held for sale |
- |
14 |
|
TOTAL ASSETS |
52,583 |
48,398 |
(a) The comparative period has been restated in
accordance with the transitional requirements of the initial
application of IFRS 16 – Leases, as well as to reflect the
finalization of the PPA related to the EL Combination.
Equity and liabilities
|
€ millions |
December 31, 2019 |
RestatedDecember 31, 2018
(a) |
| Share
capital |
79 |
77 |
| Share premium
reserve |
21,979 |
20,931 |
| Treasury shares
reserve |
(68) |
(92) |
| Other
reserves |
11,730 |
10,901 |
|
Net profit attributable to owners of the parent |
1,077 |
1,083 |
| EQUITY
ATTRIBUTABLE TO OWNERS OF THE PARENT |
34,796 |
32,899 |
|
Equity attributable to non-controlling interests |
536 |
504 |
| TOTAL
EQUITY |
35,332 |
33,403 |
| Non-current
borrowings |
6,864 |
2,564 |
| Non-current
lease liabilities |
1,619 |
1,481 |
| Employee
benefits |
556 |
459 |
| Non-current
provisions |
265 |
525 |
| Other
non-current liabilities |
193 |
226 |
|
Deferred tax liabilities |
2,137 |
2,267 |
| TOTAL
NON-CURRENT LIABILITIES |
11,634 |
7,522 |
| Current
borrowings |
403 |
1,176 |
| Current lease
liabilities |
529 |
481 |
| Trade
payables |
1,770 |
1,745 |
| Tax
payables |
455 |
99 |
| Current
provisions |
139 |
211 |
|
Other current liabilities |
2,320 |
3,762 |
|
TOTAL CURRENT LIABILITIES |
5,617 |
7,474 |
|
TOTAL EQUITY AND LIABILITIES |
52,583 |
48,398 |
(a) The comparative period has been restated in
accordance with the transitional requirements of the initial
application of IFRS 16 – Leases, as well as to reflect the
finalization of the PPA related to the EL Combination.
Consolidated statement of cash flows
|
€ millions |
|
2019 |
Restated2018 (a) |
|
NET PROFIT |
|
1,185 |
1,150 |
| Depreciation
and amortization |
|
2,121 |
1,219 |
| (Gains) /
losses from disposal of assets |
|
(43) |
2 |
| Expense
arising from share-based payments |
|
154 |
76 |
| Income
taxes |
|
350 |
139 |
| Finance
result, net |
|
142 |
109 |
| Other non-cash
items |
|
29 |
30 |
| Changes in
provisions and other |
|
32 |
(175) |
| Changes in
working capital |
|
(52) |
284 |
| Taxes paid,
net |
|
(502) |
(352) |
|
Interest paid, net |
|
(116) |
(124) |
|
NET CASH FLOWS PROVIDED BY / (USED IN) OPERATING
ACTIVITIES |
3,299 |
2,359 |
| Purchase of
property, plant and equipment and intangible assets |
|
(903) |
(710) |
| Disposal of
property, plant and equipment and intangible assets |
|
30 |
- |
| Acquisitions
of businesses, net of cash acquired |
|
(370) |
753 |
| Changes in
other non-financial assets |
|
(13) |
(5) |
|
Changes in other financial assets |
|
(437) |
- |
|
NET CASH FLOWS PROVIDED BY / (USED IN) INVESTING
ACTIVITIES |
(1,692) |
38 |
| Share capital
increase |
|
32 |
31 |
| (Purchase) /
sale of treasury shares |
|
- |
15 |
| Dividends
paid: |
|
|
|
|
- to the owners of the parent |
|
(887) |
(484) |
|
- to non-controlling interests |
|
(72) |
(7) |
| Transactions
with non-controlling interests |
|
(628) |
(13) |
| Cash payments
for principal portion of lease liabilities |
|
(571) |
(455) |
| Issuance of
bonds, private placements and other long-term debts |
|
4,954 |
- |
| Repayment of
bonds, private placements and other long-term debts |
|
(1,324) |
(293) |
| Changes in
other current and non-current borrowings |
|
(125) |
(504) |
|
NET CASH FLOWS PROVIDED BY / (USED IN) FINANCING
ACTIVITIES |
1,379 |
1,710 |
| NET
INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
2,985 |
687 |
| Cash and cash
equivalents at the beginning of the financial year |
|
1,829 |
1,159 |
|
Effects of exchange rate changes on cash and cash equivalents |
|
22 |
5 |
|
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL
YEAR |
|
4,836 |
1,852 |
(a) The comparative period has been restated in
accordance with the transitional requirements of the initial
application of IFRS 16 – Leases, as well as to reflect the
finalization of the PPA related to the EL Combination.
1 Barberini S.p.A. annual consolidated revenue on a stand-alone
basis, as disclosed at the time of the announcement of the
acquisition (on June 22, 2019), which does not represent the net
contribution to the EssilorLuxottica Group’s turnover.
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