2017 Results March 1st, 2018 - Essilor International
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2017 Results March 1st, 2018
1. Introduction
Hubert Sagnières – Chairman and Chief Executive Officer
2017 Results 2
2. 2017 Results
Laurent Vacherot – President and Chief Operating Officer
2017 Results 3
2017 Key Highlights
Good sales performance despite challenging optical market conditions
Solid growth in the Lens & Equipment businesses
Strong online sales
Acceleration in the US in H2
Investments in China and e-commerce
Full benefit of the French tax refund reinvested in fueling our Mission initiatives
Record Free Cash Flow generation supported de-leveraging
(1)
Key steps toward the proposed combination with Luxottica
(1) Free Cash Flow = Net cash from operating activities less change in WCR and capital expenditure. See slide 15.
2017 Results 2. 2017 Results 4
2017 Key Figures
2016 Growth 2017
+5.3%
Revenue €7,115m €7,490m
+3.5%
Adjusted Contribution from operations(1)(2) €1,321m €1,367m
As a percentage of revenue 18.6% 18.3%
+1.6%
Adjusted Earnings per share (2)
€3.79 €3.85
+4.0%
Adjusted Free Cash Flow(3) €963m €1,002m
Dividend per share(4) €1.50 €1.53
(1) Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs and other operating expenses).
(2) The 2017 accounts are adjusted for non-recurring items related, on one hand, to expenses associated with the proposed combination with Luxottica and, on the other hand, to the positive effects of tax
changes in the United States and France. 2016 results are not adjusted.
(3) Net cash from operating activities less change in WCR and capital expenditure. Adjusted for non-recurring items related to the German competition authority (BKA) in 2016 and to 2017 items including
costs linked to the proposed transaction with Luxottica along with the settlement of litigation..
(4) To be submitted for shareholder approval at the April 24, 2018 Annual General Meeting.
2017 Results 2. 2017 Results 5
2017 Revenue Up 6.7%
Excluding the Currency Effect
€ millions
(103)
254
-1.4%
+3.6%
224
+3.1% 7,490
+5.3%
+6.7%
7,115
2016 Revenue Like-for-like Bolt-on Currency effect 2017 Revenue
growth acquisitions (1)
(1) Local acquisitions or partnerships.
2017 Results 2. 2017 Results 6
2017 Revenue by Division
Change
Reported revenue in € millions
Lenses: solid momentum driven
2017 2016 At constant
Like-for-like
exchange rates
Reported by new products and e-
commerce
Lenses & Optical Instruments 6,498 6,218 +3.4% +5.8% +4.5%
Sunglasses & Readers 766 685 +0.1% +15.0% +12.0% Continued build-up in
Equipment 226 212 +5.8% +7.8% +6.4% Sunglasses & Readers
TOTAL 7,490 7,115 +3.1% +6.7% +5.3%
Equipment and Instruments
performed well
Fast-Growing Countries(1) 1,825 1,641 +4.2% +12.0% +11.2%
Developed Countries 5,665 5,474 +2.8% +5.1% +3.5% Fast-Growing Markets(1):
24% of total sales
(1) Fast-growing countries include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America. All divisions combined.
2017 Results 2. 2017 Results 7
H2 2017 Like-for-like Revenue Growth: +3.8%
Lik e-for-lik e revenue growth 2017 H1 2017 H2 2017
Lenses & Optical Instruments +3.4% +2.7% +4.1% Sharp acceleration in the US
North America +4.1% +2.7% +5.5%
Robust performance in China
Europe +2.4% +2.1% +2.7%
Asia/Pacific/Middle East/Africa +5.1% +5.0% +5.2%
Strong online sales
Latin America -0.9% -1.5% -0.4% FGX, Costa and MJS driving
Sunglasses & Readers +0.1% -1.5% +1.9% improvement in Sunglasses &
Readers
Equipment +5.8% +11.7% +1.2%
TOTAL +3.1% +2.5% +3.8%
2017 Results 2. 2017 Results 8
9 Acquisitions Representing ~€87m in Full-Year Revenue
North America
Europe 2
2
Topcon Visioncare
Optitrade
Japan
Logistics Center Partners In Vision
Vision Associates
CFE Optique
Latin America
Opticas 2
Mangalsons Exclusivas
Sun Optical
Technologies Visolab
Asia/Pacific/
2 new countries: Middle East/Africa
Ethiopia, Guatemala 3
2017 Results 2. 2017 Results 9
Reconciliation of Adjusted to Reported Accounts
2017 2017 2016
€ millions Items adjusted
Adjusted Reported Reported
Revenue 7,490 7,490 7,115
Contribution from operations (1) 1,367 (6) 1,361 1,321
Other income (expense) (119) (168) (287) (91)
Operating profit 1,248 (174) 1,074 1,230
Income tax (262) 131 (132) (285)
Net profit 922 (44) 878 880
Net profit attributable to equity holders
833 (44) 789 813
of Essilor International
Earnings per share 3.85 3.64 3.79
There are two main types of adjustment items. First, expenses associated with the proposed combination with Luxottica, and,
second, the positive effects of tax changes in the United States and France. These non-recurring adjustments include:
• Transaction costs related to the proposed combination with Luxottica for €109 million;
• An additional cost of €45 million principally linked to the lifting of performance conditions on two employee shareholding plans
• A one-time contribution for €19 million to mission-related activities focused on eradicating poor vision worldwide;
• An exceptional gain from the refund of the 3% dividend tax in France, net of the additional tax, for €19 million;
• A one-time gain linked to tax reform passed in the United States in December 2017 for €73 million.
(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).
2017 Results 2. 2017 Results 10Adjusted Contribution from Operations (1) (2)
up 3.5%
2017 2016
€ millions Change
Adjusted(2) Reported
Revenue 7,490 7,115 +5.3%
4,346 E-commerce
Gross profit 4,181 +3.9% A
A Transitions sales
% of revenue 58.0% 58.8%
to other lens casters
Operating expenses (2,979) (2,860) +4.2%
% of revenue B 39.8% 40.2% B Opex management
Contribution from operations (1) 1,367 1,321 +3.5%
% of revenue 18.3% 18.6%
(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).
(2) The 2017 accounts are adjusted for non-recurring items related, on one hand, to expenses associated with the proposed combination with Luxottica and, on the other hand, to the positive effects of
tax changes in the United States and France.
2017 Results 2. 2017 Results 11Adjusted Contribution from Operations (1) (2)
at 18.3% of Revenue
Contribution from operations as a percentage of revenue
+0.3%
-0.4%
-0.2%
Operational
Transitions sales
efficiencies
to other lens
New products:
casters
Varilux® X
Brazil and India
18.6% series™,
Strengthening the
Eyezen™ 18.5%
organization in
E-commerce 18.3%
China and
improvement in
e-commerce
developed
activities
countries
2016 Reported Operating Leverage Other 2017 Adjusted (2) Acquisitions 2017 Adjusted (2)
before acquisitions
(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) The 2017 accounts are adjusted for non-recurring items related, on one hand, to expenses associated with the planned combination with Luxottica and, on the other hand, to the positive effects of tax
changes in the United States and France. The reported accounts and a reconciliation of the reported accounts to the adjusted accounts are provided in appendices.
2017 Results 2. 2017 Results 12Adjusted Net Profit Up 4.8% (2)
2017 2016
€ millions Change
Adjusted(2) Reported
Revenue 7,490 7,115 +5.3%
Contribution from operations (1) 1,367 1,321 +3.5% Share based payments
Other income (expenses), net A (119) (91) - A Litigations’ provisions
Transformation costs
Operating profit 1,248 1,230 +1.5%
Financial income (expense), net (64) (66) -
Income tax (262) (285) -
Effective tax rate B 22.1% 24.5% - B Advanced Pricing Agreement
Net profit 922 880 +4.8%
Minority interests C (89) (67) - Photosynthesis Group
C
Profit attributable to equity holders 833 813 +2.5% Partners’ performances
Earnings per share (in €) 3.85 3.79 +1.6%
(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).
(2) The 2017 accounts are adjusted for non-recurring items related, on one hand, to expenses associated with the proposed combination with Luxottica and, on the other hand, to the positive effects of
tax changes in the United States and France.
2017 Results 2. 2017 Results 13Capital Expenditure: Deploying Advanced Technologies
to Support Long-term Growth
7%
6%
285
232 321
5% 192 5.6%
4.7%
227
4.8%
New photochromic lens
4.6% 273 282
4% manufacturing lines
4.0%
3.8% 3.8% Modernization of regional
3%
laboratories
2%
2011 2012 2013 2014 2015 2016 2017
XX = Capital expenditure in € million (net of disposals) Capital expenditure as a percentage of revenue
2017 Results 2. 2017 Results 14Adjusted Free Cash Flow >€1bn (3)
58 Change in WCR
€ millions Fast De-leveraging
Net debt in € millions
308 Capital expenditure
2,089 2,062
364 Dividends 1,793
Operating cash flow
1,661
1,291
(excl. change in WCR)
+925
317 Net financial investments
400 Reported change in net debt
Capital increase 34
Foreign exchange and others(2) 122 2014 2015 2016 2017
(1) Free cash flow = Net cash from operating activities less change in WCR and capital expenditure / (2) Including €96m of foreign exchange impact. / (3) Adjusted for non-recurring items related to
the German competition authority (BKA) in 2016 and to 2017 items including costs linked to the proposed combination with Luxottica along with the settlement of litigation.
2017 Results 2. 2017 Results 15Proposed Dividend(a) per Share
1.50 1.53
1.11
1.02
0.94
0.85 0.88
0.83
323 333
237
198 216
172 177 185
2010 2011 2012 2013 2014 2015 2016 2017
Payout (in € million) Dividend per share (in €)
(a) To be submitted for shareholder approval at the April 24, 2018 Annual General Meeting.
2017 Results 2. 2017 Results 163. Essilor in 2018
Paul du Saillant – Chief Operating Officer
Laurent Vacherot – President and Chief Operating Officer
2017 Results 17Successful New Product Launches in 2017…
Innovation USA FGM Online China Myopia
North America Europe
H2
H1
H2 Style
Colours H1
collection
0 H2
Asia/Pacific
Latin America
H1
H1
2017 Results 3. Essilor in 2018 18…Delivering Promising Results
Innovation USA FGM Online China Myopia
Above sales target Already 20% of Crizal® Eyezen™ volume Eye Protect System™, the
~70% of Varilux® volumes in the USA doubled in 2017 fastest growth in the blue
series volumes Clear brand growth Broadened product filter lens category
Trade up driver range Volume tripled in 2017
2017 Results 3. Essilor in 2018 19Ongoing Benefits of Innovations in 2018
Innovation USA FGM Online China Myopia
North America
Europe
NEW IN 2018
NEW IN 2018
Style
Colours
collection
ONGOING BENEFIT
ONGOING BENEFIT
Asia Pacific
Latin America NEW IN 2018
NEW IN 2018
2017 Results 3. Essilor in 2018 20The “Ultimate Lens Package” Driving Strong Momentum
in the US
Innovation USA FGM Online China Myopia
The Best in Vision, Clarity, and
Protection in a Single Lens
Single Vision Lens Wearers Progressive Lens Wearers
[c.100 million people in the US] [c.52 million people in the US]
+ + + +
Varilux®, Crizal® and Transitions® growing high single digit in Q4 2017
Source: Essilor - 2017 estimates
2017 Results 3. Essilor in 2018 21Continuing Strong Key Account Partnerships
Innovation USA FGM Online China Myopia
Category development
Supply chain offering
New partnerships formed
Faster growing retail groups
Interest from new players
2017 Results 3. Essilor in 2018 22Fast-Growing Markets Will Continue to Drive Growth (1)
Innovation USA FGM Online China Myopia
Africa-Middle East Asia-Pacific Latin America
NEW NEW
Ethiopia Indonesia Vietnam Guatemala
>100m inhabitants 260m inhabitants 100m inhabitants
Acquisition of an integrated
Partnership with market leader Expansion to 35 cities New prescription laboratory
prescription laboratory with
Joint approach by business Mid-tier acceleration >100 accounts trained in 2017
~50 optical stores
and mission 1,500 Mitra Mata by end 2018 88 Vision Ambassadors
2017 revenue growth > 15% (like-for-like and bolt-on acquisitions combined, including Lenses and Optical Instruments, Equipment and Sunglasses & Readers)
2017 revenue growth < 15% (like-for-like and bolt-on acquisitions combined, including Lenses and Optical Instruments, Equipment and Sunglasses & Readers)
(1) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America
2017 Results 3. Essilor in 2018 23E-Commerce Ready to Sustain High Growth
Innovation USA FGM Online China Myopia
En Route to €500m Revenue Stronger Foundation for Future Growth
Key 2017 achievements:
€440m(1)
(2)
+39% vs. prior year Global organization fully established
+15% like-for-like growth
Strong growth from mature markets
€325m(1) (2) Increased our presence in FGM
+47% vs. prior year
RoW Strategic giving programs
North
America Key areas of focus for 2018 onwards
Accelerate in the eyeglass segment
Europe
Develop platforms for key Sun brands
2016 2017
Increased focus on proprietary contact lens
brands
(1) Including Sunglasses & Readers online sales Leveraging digital properties
(2) At constant exchange rates
2017 Results 3. Essilor in 2018 24Delivering 30% Revenue Growth in China in 2017
Innovation USA FGM Online China Myopia
Retail and Online
Double digit growth
Lens Business
Double digit growth
MJS/Aojo deployment
Eyezen™
Growing presence on leading
Kodak®/Partners
platforms
Creasky
New retail
Quality Wholesalers
Over 1,200 stores 2018 Revenue
>€500m
Sunwear
Bolon™ streamlined supply
chain, strong brand equity
International deployment
Mujosh brand
2017 China Revenue Breakdown
2017 Results 3. Essilor in 2018 25A New Consumer-Driven Organization
Innovation USA FGM Online China Myopia
AFFORDABLE INCLUSIVE
LENSES MYOPIA SOLUTIONS
SUNWEAR & FASHION SOLUTIONS
KEY ACCOUNT
ORGANIZATION
Myopia
Management 2.5 New Vision
ONLINE
ORGANIZATION Kids & Teens
€5.8bn
Generation
Essilor Vision
Foundation
Distribution of
MONOBRAND specialized Last mile
RETAIL products distribution
WHOLESALE
800 million consumers in need of vision care; 4 people out of 10 are myopic
Unique leadership and management team
2017 Results 3. Essilor in 2018 26Innovate in the Myopia Segment: A 5 Bn Wearer Opportunity
Innovation USA FGM Online China Myopia
A Growing Pandemic Key Consumer Challenges
2017 CAGR 2030 CAGR 2050 Poor aesthetics and physical comfort
Billion people(1)
5.0 Growing prevalence of myopia in children(2)
3.1%
2.7 Risk of eye disease in high myopes(3)
3.2%
1.8
A Dedicated Organization
Integrated approach including science, awareness, solutions and distribution
Global team reporting to COO
Dedicated business unit in China
(1) Source: Essilor estimates, Brien Holden Vision Institute
(2) Morgan IG1, Ohno-Matsui K, Saw SM. Myopia. Lancet. 5 May 2012
(3) Verkicharla, Ohno-Matsui, Saw. Current and predicted demographics of high myopia and an update of its associated pathological changes, Ophtalmologic & Physiological Optics. 2015
2017 Results 3. Essilor in 2018 27Further Progress towards our Core Ambition: Eradicating
Poor Vision Within One Generation
in billions of people
12
# Uncorrected
in billion of people
10 3.8
8 3.3
$5
3.3 to improve the sight
of one person*
6 2.5
2.6 2.5
4 2.0
2
2.9
3.8
Collective impact $500M / yr
0 to eradicate poor vision
0 in 30+ years
2017 2050 2017 2050 2100
No need for vision correction
Corrected If we do nothing Impact with $500M/yr
Uncorrected
(*) Low-income populations and people living below the international poverty line
2017 Results 3. Essilor in 2018 28Accelerating in 2018
Awareness Inclusive Business Strategic Giving
More than 5,700 primary Essilor Social Impact Fund
vision care providers trained
in ten countries at the end of
2017 More than 3,000 Essilor
New countries: Bangladesh, employees volunteered
Liberia, Indonesia globally
Private Public Partnerships
Product Innovation
€19 million new contribution
2017 Results 3. Essilor in 2018 29Essilor in 2018 at a Glance
Deployment of robust innovation pipeline
Lenses business Strong potential in the US and China
Improvement in Brazil and India
Sustained momentum in developed countries
E-commerce
Continue to invest in fast-growing markets
Sunglasses Xiamen Yarui Optical (Bolon™) expected to be back to growth
& Readers Expansion of MJS and Aojo footprint
Targeting acceleration from acquisitions & partnerships in H2
Group-wide Tax rate similar to 2017 level
Continued deleveraging
2017 Results 3. Essilor in 2018 30Outlook for 2018
Like-for-like Revenue Growth Around 4%
Contribution from operations(1)
as a percentage of revenue ≥ 18.3%(2)
Finalization of the Essilor and Luxottica proposed combination planned for the first
part of 2018
(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 new strategic acquisition(s).
2017 Results 3. Essilor in 2018 31Questions & Answers
4. Appendices
2017 Results 33Reported P&L Statement
€ millions 2017 2016 Change
Revenue 7,490 7,115 +5.3%
Gross profit 4,346 4,181 +3.9%
% of revenue 58.0% 58.8%
Contribution from operations (1) 1,361 1,321 +3.0%
% of revenue 18.2% 18.6%
Operating profit 1,074 1,230 -12.7%
Net profit 878 880 -0.1%
Net profit attributable to equity holders
789 813 -3.0%
of Essilor International
% of revenue 10.5% 11.4%
Earnings per share (in €) 3.64 3.79 -4.0%
(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).
2017 Results 4. Appendices 34You can also read
