2016 Results - Essilor Group · PDF file2016 Revenue Up 7.6% Excluding the Currency Effect ......
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Transcript of 2016 Results - Essilor Group · PDF file2016 Revenue Up 7.6% Excluding the Currency Effect ......
2016 Results February 17, 2017
2016 Results 2
Hubert Sagnières – Chairman and Chief Executive Officer
1. 2016 Highlights
2016 Results 3
Improving and Protecting the Vision of 7.4 Billion People Worldwide
1. 2016 Highlights
2016 Results 4
2016 Key Figures
2016
5 years CAGR Change vs. 2015
Revenue €7,115m
5.9% CER
(1) 7.6%
11.2%
€1,321m Contribution from operations(2) 4.6% 12.1%
€3.79 Earnings per share 6.2% 9.2%
€900m Free Cash Flow(3) 3.8% 14.2%
(1)Growth at constant exchange rates
(2)Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs, other operating expenses)
(3)Free cash flow = net cash from operating activities less change in WCR and capital expenditure
(4)To be submitted for shareholder approval at the May 11, 2017 Annual General Meeting
1. 2016 Highlights
€1.50 Dividend per share(4) 35.1% 12.0%
2016 Results 5
Growing in a Larger Playing Field
Lenses: New products, consumer marketing, integrated supply chain
Online: Enhanced consumer experience, acquisitions in Europe
Sunglasses & Readers: Brands and products, new information systems, acquisition in China
1. 2016 Highlights
2016 Results 6
Balanced and Resilient Geographic Performance
Europe up 9.2%(1): Consumer marketing, new products, online sales
Asia/M.-East/Africa up 8.9%(1): Strong demand for better vision
Latin America up 23.9%(1): Mid-tier, new models, new countries
North America up 4.1%(1): A stronger platform with new business models (1) 2016 combined revenue growth (like-for-like and bolt-on acquisitions) across all business divisions
Fast-growing countries include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America.
1. 2016 Highlights
2016 Results 7
Strong Differentiators to Create Value
A dynamic year for acquisitions and partnerships
Mission: awareness, new wearers
Innovation: correction, protection, prevention
1. 2016 Highlights
2016 Results 8
Significant Growth Potential
1. 2016 Highlights
7.4
billion
2016
Source: United Nations
World population
9.7 billion
2050
2016 Results 9
Untapped Global Opportunity
1. 2016 Highlights
€96bn
2015
c. €300bn
(1) Sell-out value for contact lenses, spectacle lenses, readers, sunglasses and frames
(2) Assuming 100% of vision correction and protection needs addressed and fast-growing country product mix in line with more advanced developing countries
Source: Essilor estimates
Size of the global optical market in value(1)
Global optical market value
with 100% vision needs covered(2)
2016 Results 10
Géraldine Picaud – Chief Financial Officer
2. 2016 Results
6,716
7,115
+5.9%
241
270 -112
2015 Revenue Like-for-likegrowth
Bolt-onacquisitions (1)
Currency effect 2016 Revenue
+3.6%
+4.0%
-1.7%
2016 Results 11
2016 Revenue Up 7.6% Excluding the Currency Effect
€ millions
(1) Local acquisitions or partnerships
+7.6%
2. 2016 Results
Q4 2016: +7.2%
Like-for-like growth: 3.0%
Bolt-on acquisitions: 4.0%
Currency effect: 0.2%
2016 Results 12
2016 Revenue by Division
2. 2016 Results
(1) Fast-growing countries include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America.
Like-for-likeAt constant
exchange ratesReported
Lenses & Optical Instruments 5,840 6,218 +3.9% +8.2% +6.5%
Sunglasses & Readers 673 685 +1.0% +3.5% +1.7%
Equipment 203 212 +4.7% +4.9% +4.8%
TOTAL 6,716 7,115 +3.6% +7.6% +5.9%
Fast-Growing Countries(1) 1,502 1,641 +8.1% +15.1% +9.3%
Developed Countries 5,214 5,474 +2.3% +5.5% +4.9%
Change
Reported revenue in € millions 2015 2016
2016 Results 13
2016 Lenses & Optical Instruments Revenue by Region
2. 2016 Results
Like-for-likeAt constant
exchange ratesReported
North America 2,587 2,707 +2.0% +4.8% +4.6%
Europe 1,777 1,905 +3.4% +9.4% +7.2%
Asia/Pacific/Middle East/Africa 1,071 1,138 +7.5% +8.5% +6.2%
Latin America 405 468 +8.0% +24.0% +15.6%
Lenses & Optical Instruments 5,840 6,218 +3.9% +8.2% +6.5%
Reported revenue in € millions 2015 2016
Change
2016 Results 14
18 Acquisitions Representing ~€304m in Full-Year Revenue
2. 2016 Results
Europe
3
Latin America
5 Asia/Pacific/
Middle East/Africa
5
North America
5
Vision Direct Opti-Port
Opticas
Place Vendôme One Vision
Optical
Icare Industries
Digital Lab
Summer Vision
Ocutec
Laboratorio
Axis Medical Group
Allaboutvision.com
US Optical
MyOptique
Mamtora(1) Thai Thanh Phat(1) SOI
SCL International
Jiangsu Creasky
Optical(1)
Photosynthesis
Group
Sun
Online
(1)These companies were not consolidated in 2016
2016 Results 15
Contribution from Operations(1) up 4.6%
(1)Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs, other operating expenses).
Revenue 6,716 7,115 +5.9%
Gross profit 4,012 4,181 +4.2%
% of revenue 59.7% 58.8%
Operating expenses (2,749) (2,860) +4.0%
% of revenue 40.9% 40.2%
Contribution from operations(1) 1,263 1,321 +4.6%
% of revenue 18.8% 18.6%
€ millions 2016 Change2015
2. 2016 Results
18.8%19.0%
18.6%
+0.2 %-0.1%
-0.3%
2015 Operatingleverage and
synergies
2016 before bolt-on acquisitions(2)
Bolt-onacquisitions excl.
online
Online bolt-onacquisitions
2016
2016 Results 16
Contribution from Operations(1) at 18.6% of Revenue
Contribution from operations as a percentage of revenue
(1) Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs, other operating expenses)
(2) Local acquisitions or partnerships
2. 2016 Results
Trade up/Innovation
Efficiency gains
Synergies
Prepare the future
Headwinds
Vision Direct
MyOptique Group
Revenue 6,716 7,115 +5.9%
Contribution from operations ( 1 ) 1,263 1,321 +4.6%
Other income (expenses), net (80) (91) -
Operating profit 1,183 1,230 +3.9%
Financial income (expense), net (63) (66) -
Income tax (308) (285) -
Effective tax rate 27.5% 24.5% -
Net profit 813 880 +8.2%
Minority interests (56) (67) -
Profit attributable to equity holders 757 813 +7.4%
Earnings per share (in €) 3.57 3.79 +6.2%
Change€ millions 20162015
2016 Results 17
Profit Attributable to Equity Holders Up 7.4%
(1)Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs, other operating expenses).
2. 2016 Results
2016 Results 18
Capital Expenditure: Continuing to Invest in Long-term Growth
2. 2016 Results
192
232
285
227
321
273
100
150
200
250
300
350
2011 2012 2013 2014 2015 2016
4.6%
4.7%
5.6%
4.0%
4.8%
3.8%
XX% = As a percentage of revenue Capital expenditure in € million (net of disposals)
27 1031
754
119
41
294
1,202
8
2016 Results 19
Adjusted(1) Free Cash Flow(2) Up 11%
(1) Adjusted for the disbursement of the fine to the Bundeskartellamt (BKA) that was set aside in 2010, for a total amount of €63m, including accrued interest
(2) Free cash flow = Net cash from operating activities less change in WCR and capital expenditure.
(3) The theoretical 2015 dividend amounted to €237.1 million. However, the option to receive the dividend in shares was taken up by 67.6% of shareholders
and the cash dividend effectively disbursed amounted to €79.1 million
Operating cash flow
(excl. change in WCR)
Capital increase
Capital expenditure
Change in WCR
Dividends(3)
Net financial investments
€ millions
+900
Foreign exchange and other
2. 2016 Results
Share buybacks
Reported change in net debt
2016 Results 20
Net Debt as of December 31, 2016: 1.2x EBITDA
2. 2016 Results
Strong cash generation
BKA fine disbursement
Acquisitions
An active year
Earn-out & put options
2,1682,089
2,172
2,062
1.41.3 1.3 1.2
H1 2015 2015 H1 2016 2016
Net debt Net debt/EBITDA
2016 Results 21
Dividend per Share: 24th Consecutive YoY Increase
(a) To be submitted for shareholder approval at the May 11, 2017 Annual General Meeting
2. 2016 Results
172 177 185 198 216237
323
0.83 0.85 0.880.94
1.021.11
1.50(a)
2010 2011 2012 2013 2014 2015 2016
Payout (in € million) Dividend per share (in €)
2016 Results 22
Laurent Vacherot – President and Chief Operating Officer
3. Essilor in 2017
2016 Results 23
Further Developing Essilor in 2016 Despite Unexpected Headwinds
Unchanged Optical Industry Fundamentals
3. Essilor in 2017
Good performance in Europe
Improved position in Fast-Growing Countries
Solid performance of the Equipment division
Eyezen™ and Eye Protect System™ launch momentum
Dynamic year for acquisitions and partnerships
External factors:
USA: Industry slowdown from Q2 2016 & regulatory changes
Brazil: Challenging environment
Sunwear: Unfavorable weather conditions
Internal factors:
Transitions®: Increased decline in sales to other lens casters
Clearly™/Coastal™: Recovery longer than expected
Bolon™: Implementation of the new inventory management system
2016 key
achievements
Headwinds
2016 Results 24
A Clear Growth Strategy
Size and growth of industry segments by 2018 / Prescription sun lenses are included in prescription lenses
Fast-Growing Markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America
3. Essilor in 2017
Innovation
Consumer Focus and Branding
Partnerships and Acquisitions
Business Interconnections and Operational Efficiency
10-12%
FAST-GROWING
MARKETS
€5.8bn
~ €28.5bn 6-7%
€5.8bn 14%
ONLINE
€10bn
SUNGLASSES
& READERS
6-7%
€12.7bn 3-4%
PRESCRIPTION
LENSES
2016 Results 25
A New Organization to Meet Growing Operational Needs
3. Essilor in 2017
3 Business Committees:
Lenses, Sun & Readers, Online
33 members
11 different nationalities
Developing Talent
MANAGEMENT COMMITTEE
Hubert Sagnières
Chairman and CEO
Laurent Vacherot
President and COO
Eric Thoreux
Sun & Readers and China
Jean Carrier
COO
Bernhard Nuesser
Online
Paul du Saillant
COO
Jayanth Bhuvaraghan
Mission, Sustainability &
Communication
Frédéric Mathieu
Human Resources
Géraldine Picaud
Finance, M&A
Jeremy Teo
Strategy
2016 Results 26
Delivering Solid Growth in 2017
3. Essilor in 2017
Transitions® Online Sunwear US
2016 Results 27
The USA, More Resilient than it Looks
3. Essilor in 2017
Transitions® United-States Sunwear Online
(1) Penetration of total lens industry in volume in 2015, Source: Essilor estimates
US lens business
Good first-half
Slower second-half
Good momentum in December 2016 and January 2017
An attractive market
Underpenetration of Key
Categories(1)
New Players
Anti-reflective lenses
Progressive lenses
...
39% 65%
85% 100%
USA Canada Germany Japan
25% 30% 43% 49%
Brazil USA Denmark NewZealand
Avg
2013
-2016
Solid long term trends
despite volatility
US Lens market volume growth rates (in %)
Avg
2013
-2016
2.2% 2.2% 2.3% 1.9%
2.5%
-0.7% 0.4% 0.5%
Avg
2013
-2016
Avg
2013
-2016
Source: VisionWatch Surveys
Q4 Q1 Q2 Q3
2016 2016 2016 2016
2016 Results 28
A Comprehensive Strategy to Better Tap Market Opportunities
Education and awareness
Branding
Consumer insights via
online models
Innovation Deployment Consumer Focus Trade Opportunities
Supply chain offering
Category development
New partnerships formed
Increased interest from
new players
Catch-up potential
Leveraging all group networks
Continuous innovation
3. Essilor in 2017
Transitions® United-States Sunwear Online
Independent
ECPs
2016 Results 29
Leveraging Key Services Platforms to Boost Value Creation with Independent Eye Care Professionals
Accelerate category development and new product
penetration
Extend the product line (contact lenses, sunwear,
readers, etc.)
Enhance conversion rate*
Improve efficiency from manufacturers to PoS
Increase consumer reach
c.7,300 points of sales and counting…
3. Essilor in 2017
* According to the Vision Council survey (12-months ended June 2016), Independent ECPs provide 69% of eye exams but only 46% of prescription eyeglasses (in volume)
Unlocking the Full Power of Independent Eyecare Professionals
Transitions® United-States Sunwear Online
2016 Results 30
Accelerate 2 Major Programs Roll-Out for Independent Eyecare Professionals
3. Essilor in 2017
Frame assortment
Delivery time
Efficiency gains
Traffic building
Conversion
Category growth
~250 ECPs by year-end 2016
>1,000 ECPs by year-end 2017
>1,200 ECPs by year-end 2016
More than double by year-end 2017
Transitions® United-States Sunwear Online
2016 Results 31
Transitions Optical Snapshot
Group networks Sales to other lens casters
2016 volume growth: +3.5%
Product mix: Mainly progressive lenses,
limited penetration in single vision lenses
Geographic mix: ~50% US /~50% Rest
of the world
2016 volume growth: -8.5% (~€223m)
Geographic mix: Mainly US
4 main customers
2016 phenomena:
Increased use of alternative technologies
US market slowdown
Inventory impact
3. Essilor in 2017
Transitions® United-States Sunwear Online
Volume breakdown
2016 Results 32
An Organization Focused on Accelerating Momentum
3. Essilor in 2017
Results so far
H1 2016 H2 2016
Transitions volume growth
(Group networks)
+
~2%
~5%
Multi-brand advertising
Promotion & Mid-tier
offering
ECP training
In-store activation
Integrated Marketing
Incentive changes
Dedicated teams in key
countries
Sales force training
Clear and actionable
country tactical plans
Internal mobilization
Transitions® United-States Sunwear Online
Enhanced
properties more
appealing to
myopes
High level of
satisfaction among
consumer target(1)
Launch by the end
of the year
2016 Results 33
Unlocking Potential in Myopes and Young Wearers
Outstanding Potential
20%
6%
>45 years old <45 years old
Global penetration rate of
photochromic lenses in volume New dedicated
product forthcoming Online channel
3. Essilor in 2017
Activating multi-lever strategy
New colors
Transitions® United-States Sunwear Online
(1) Test of Transitions® Signature™ VII vs. New Transitions® led during 4 weeks among wearers of clear lens between 18 and 45 years old. Over 60% very satisfied with New Transitions® Lenses vs. Transitions® Signature™ VII and ~40% indicated they would definitely buy
2016 Results 34
Leverage Innovation and Increase Access with Segmented Products
3. Essilor in 2017
1990 1992 2000 2002 2004 2006 2008 2010 2012 1996 2014 2015 2017 2018
Gen. I Gen. II Gen. III Gen. IV Gen. V
Drivewear
Gen. VI
Xtractive Gen VII
Graphite
Green
New
Xtractive
Style
Colors
Eye Protect
System
Flash to
Mirror
Clear to
Polarized
2016
New
products...
Classic
Chinese partners’
offerings
Signet Armorlite
PhotoViews New products…
Transitions® United-States Sunwear Online
2016 Results 35
Big Step in Building Global Presence
3. Essilor in 2017
Over 3 billion people connected across the world(1)
Online optical industry: >14% CAGR
10-15% of the total optical retail industry by 2025(2)
Sources: Estin & Co 2014 estimates and analysis, Essilor International
(1) Source: Internet Live Stats (www.InternetLiveStats.com). Elaboration of data by International Telecommunication Union (ITU), World Bank, and United Nations Population Division.
(2) Includes online pure players and click & mortars / for spectacles, contact lenses and sunglasses
Transitions® United-States Sunwear Online
2016 Results 36
~€400m Annualized Online Revenue(1)
, Ahead of our Mid-term Ambition
3. Essilor in 2017
North America
44%
RoW
8%
Europe
48%
Contact
Lenses
+7%(3)
Prescription
Eyeglasses
+11%(3)
Sunwear
+21%(3)
2016 Sales Breakdown by Region 2016 Sales Breakdown by Category of Products
(1) Run-rate end of 2016 revenue including online sales of group sun brands (Bolon™, Costa® and FGX brands) / (2) At constant exchange rates / (3) 2016 like-for-like growth
Unaudited figures compiled from Group B2C website sales and the online sales of the Sunglasses & Readers division
>11%
like-for-like
growth
Q4: >+20%
Transitions® United-States Sunwear Online
€325m
Up 47%(2)
2016 Results 37
Accelerate Growth and Improve Profitability in 2017
3. Essilor in 2017
New website & consumer experience
Product/price positioning adjustments
First signs of improvement since new website launch
Improve
Clearly™/Coastal™
performance
Media push to reach new consumers
More convenient user experience
Accelerate the
Eyeglasses category
Procurement synergies
Regrouping platforms, starting with contact lenses
Cross-selling strategy
Develop synergies
and efficiencies
Bolon™: multichannel strategy
Costa®: new website & consumer experience Owned sun brands
A reinforced management team
under Bernhard Nuesser’s leadership Organization
Transitions® United-States Sunwear Online
2016 Results 38
Sunwear Industry: Clearly Segmented, Highly Fragmented
3. Essilor in 2017
“UNORGANIZED TRADE”
c.300m units
Performance
c.30m units
~50 brands
>500m units
Thousands of players
25-30m units
Luxury fashion
Entry/mid-tier
Retail
sell-out price
Functional use
Less than 25% of the world
population equipped
with sunglasses
~10% of eyeglasses
wearers equipped with
prescription sunglasses
Most sunglasses do not
offer the right vision
quality
Limited differentiation in
vision quality regardless
the price
An Underpenetrated Industry
Transitions® United-States Sunwear Online
2016 Results 39
Accelerating the Development of Successful Local Mid-tier Brands
3. Essilor in 2017
Countries where products are distributed
Lens Performance
Prescription Sun
Supply Chain Efficiencies
Consumer Access
Essilor Expertise
H2 2016: Back to Trend Growth
Sunglasses & Readers - 2016 like-for-like growth
-3.9%
+6.7% H1 2016
H2 2016
Transitions® United-States Sunwear Online
2016 Results 40
Leveraging Strong US Footprint for Global Expansion
3. Essilor in 2017
FGX Costa®
Popular-priced Positioning Performance
Target All Anglers... and water lovers of all kind
Price <$60 >$120
Main channels Mass/Drug/Department Stores Sport specialty/ECPs/Internet
2017 Action
Plan
Channel expansion in the USA:
Pilot, Bed, Bath & Beyond, shop-in-
shop, own store test, e-commerce
Category expansion: new
collections (Item8, Multi-Focus)
Internationalization
Channel mix diversification: sun
specialty, Internet (new website),
travel retail, doctor alliances
Category expansion: optical
Geographic expansion: US (North-
east coast & California) and abroad
Jeremie Beyou - Skipper -
Finished 3rd in the Vendée
Globe race
Transitions® United-States Sunwear Online
2016 Results 41
A Complementary Brand Portfolio to Capture the High-Growth Mid-Tier Sunglasses Segment in China and Asia
3. Essilor in 2017
BOLON™ MJS
Classic/Elegant/Fashionable Positioning Trendy
Target Female/Male/kids 20-30 years old
Price 700-800 RMB 400-800 RMB
Main channels ECPs (through wholesalers)
in Tier 1-5 cities
Franchised stores in shopping malls
in Tier 1-2 cities
2017 Action
Plan
Sell-through vs. sell-in management
New plant: start in Q1
New distribution channels &
Internationalization
Development of sun prescription
lenses
New ambassador: Hailey Baldwin
Continuing store expansion
in China
Development of online sales
Ongoing expansion in Southeast
Asia
Transitions® United-States Sunwear Online
2016 Results 42
Widening our Reach in the World’s Two Largest Optical Markets
Second biggest market in
value: ~€10bn(1)
A new organization under
Eric Thoreux’s responsibility
CHINA
Biggest market in value:
~€30bn(1)
New models
USA
3. Essilor in 2017
(1) Sell-out value for contact lenses, spectacle lenses, readers, sunglasses and frames
Source: Essilor estimates
2016 Results 43
Alain Riveline – Corporate Senior Vice President Global Marketing
4. Innovation and New Products
A New Consumer Segmentation Based on Life Cycle
Eye development
Learning life
5 consumer profile roadmap to support Innovation
KIDS & TEENS [0 - 18 years]
YOUNG ADULTS [19 - 44 years]
MIDLIFE [44 - 64 years]
SENIORS [65 & +]
NEXT GENERATION CONSUMERS
Myopia/hyperopia
Eye fatigue (non wearers)
Building life
Presbyopia appears
(long period of denial)
Managing life
Presbyopia stabilized
But cataract, AMD risk
Harvesting
4. Innovation and New Products 44
2016 Results 45
Developing Additional Tools to Get Consumer Insights
WEB/SOCIAL MEDIA LISTENING ONLINE COMMUNITIES
SELFIE VIDEOS HOUSE LAB
4. Innovation and New Products
46
Who are the 2017 Presbyopes?
4. Innovation and New Products 2016 Results
♀ ♂ 100
Thousands of inhabitants 40,000 80,000 40,000 80,000
Source: ONU, 2015
MADE UP OF 2 GENERATIONS:
BABY BOOMERS
GENERATION X
(born 1946-1964)
(born 1965-1980)
They start retiring
New presbyopes
& new comers
2016 Results 47
Generation X: New Presbyopes, Living Differently
4. Innovation and New Products
YOUNG
AND ACTIVE
~45% of the labor
force are Gen Xers LATE
PARENTS
Median age of first
time mothers delayed,
now standing at 30
FEEL
ALWAYS
RUSHED
They buy online twice
as much as baby
boomers,
to save time MULTITASKERS
"We want to balance it
all: career, family,
volunteerism"
CONNECTED
The first generation to
grow up with
computers
48
2016 Results 49
Reaching New Presbyopes Earlier and Better
ENLARGE THE POOL OF PROGRESSIVE WEARERS
~1.5 billion people worldwide
~100 million new presbyopes every year
GENERATION X
~1.2 billion people worldwide
BABY BOOMERS
4. Innovation and New Products
2016 Results 50
Starting in 2017, Reaching Full Speed in 2018
4. Innovation and New Products
Europe:
April 2017
Canada:
June 2017
Asia/Oceania
/Middle East/Africa
October 2017 United States:
September 2017
Latin America:
September 2017
Pricing
Strategy Price premium versus Varilux® S™ series
2016 Results 51
A Rich 18-Month Innovation Pipeline
4. Innovation and New Products
2016 Results 52
Laurent Vacherot – President and Chief Operating Officer
5. Outlook
2016 Results 53
In Brief
5. Outlook
Solid optical market prospects
A clear 2017 action plan: aligned and focused teams
Continuing to invest in long-term growth
Strong innovation pipeline for 2017 and beyond
Short term macro and industry uncertainties
2016 Results 54
Outlook for 2017
5. Outlook
(1) Contribution from operations = Revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs, other operating expenses).
(2) Excluding any additional strategic acquisitions.
Revenue Growth:
Like-for-like
Excluding currency effect
Contribution from operations(1)
as a percentage of revenue
Between 3% and 5%
Around 18.5%(2)
Between 6% and 8%
2016 Results February 17, 2017