Update of the 2020 Group Business Plan - August 3, 2018 - Investor Relations

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Update of the 2020 Group Business Plan - August 3, 2018 - Investor Relations
Update of the
2020 Group Business Plan

      August 3, 2018
Update of the 2020 Group Business Plan - August 3, 2018 - Investor Relations
DISCLAIMER

This presentation may contain forward looking statements based on current expectations and
projects of the Group in relation to future events. Due to their specific nature, these statements
are subject to inherent risks and uncertainties, as they depend on certain circumstances and facts,
most of which being beyond the control of the Group. Therefore actual results could differ, even to
a significant extent, with respect to those reported in the statements.

                                                                                              1
Update of the 2020 Group Business Plan - August 3, 2018 - Investor Relations
TODAY AGENDA

               •   An Attractive Eyewear Industry

               •   What Safilo stands for

               •   Safilo in context

               •   Key Strategies

               •   Financial Targets

                                                    2
Update of the 2020 Group Business Plan - August 3, 2018 - Investor Relations
TODAY AGENDA

               • An Attractive Eyewear Industry
               •   What Safilo stands for

               •   Safilo in context

               •   Key Strategies

               •   Financial Targets

                                                  3
Update of the 2020 Group Business Plan - August 3, 2018 - Investor Relations
AN ATTRACTIVE EYEWEAR INDUSTRY

                                                                                     •   The share of the world’s population aged 45+ will
             Healthy Eyewear Industry                                                    increase significantly
                  EUR bn, Wholesale value                      Demographics
                                                           >2bn people in need of    •   Increasing wealth in emerging markets will result in
       Developed           Emerging                           eyecare solution           more people gaining access to eyecare
                                            CAGR ‘17-’20
                           ~+3%-4%                                                   •   Health & wellness trends will continue to generate
                                  21                                                     interest in preventive/protective eyecare
            +4%
                                                ~+2%
                     18                                                              •   Consumers are increasingly willing to pay for brands that
      16                                                                                 offer    distinguishing   value.    Traditional        brand
                                                            Consumer behavior
                                                                                         segmentation may lose relevance
                                                             Impact of millennials
                                                                                     •   Millennials will be 45% of consumers in 2025 and will
                                                                                         influence consumption attitudes also for eyewear

                                                ~+5%                                 •   Eyewear distribution is fragmented, with a large part of
                                                                                         business in independent opticians
                                                                 Channels
                                                              Digital growing        •   Digital channels currently represent ̴ 5% sales, growing
     2014           2017          2020E                                                  fast, with online platforms/multi brand websites and
                                                                                         specialist players leading the growth. Omni-channel
                                                                                         becomes more and more important

SOURCE: Management estimates                                                                                                                4
Update of the 2020 Group Business Plan - August 3, 2018 - Investor Relations
TODAY AGENDA

               •   An Attractive Eyewear Industry

               • What Safilo stands for

               •   Safilo in context

               •   Key Strategies

               •   Financial Targets

                                                    5
Update of the 2020 Group Business Plan - August 3, 2018 - Investor Relations
WHAT SAFILO STANDS FOR

                         • 2nd Biggest Global Player
                         •   Distinctive and recognized product design, creation and innovation capabilities,
                             supported by strong communication in reaching key influencers

                         •   140 years of eyewear manufacturing: Made in Italy capacity and craftmanship,
                             recently enhanced by smart automation and the latest technologies

                         •   Know-how in licenses' management and ideal partner for high potential brands
                             within a multi-segment brand portfolio

                         •   Four own core brands representing 25% of the Group’s business

                         •   Direct distribution in 40 countries and wide network of global partners worldwide,
                             reaching ~100.000 points of sales

                                                                                                        6
Update of the 2020 Group Business Plan - August 3, 2018 - Investor Relations
WHAT SAFILO STANDS FOR:                 Product Design and Manufacturing Footprint

•   A new Product Creation Dep.
    was created in late 2014 with the
    purpose to drive the creation,
    development and innovation of
    the   most    unique    eyewear
    collections, operating from a
    network of international design
    studios
•   Our products are manufactured
    both in-house, in our own plants
    in Italy, China, Slovenia and the
    United States and through a
    network      of   third-party
    manufacturers in Italy and Asia

•   We tailor production to each
    brand and market segment, from
    the   value-for-money    to   the
    highest end atelier

•   In 2017, we produced 40% of our                 Design studios: Padua, Milan, New York, Portland, Hong Kong
    sale volumes in-house                           Plants: Europe                     North America       Far East
                                                            •   Longarone (Italy)       • Salt Lake City   • Suzhou (RPC)
                                                            •   S.Maria di Sala (Italy)
                                                            •   Martignacco (Italy)
                                                            •   Bergamo (Italy)
                                                            •   Ormoz (Slovenia)
                                                                                                                            7
Update of the 2020 Group Business Plan - August 3, 2018 - Investor Relations
WHAT SAFILO STANDS FOR:                       Global Distribution Network

•   We sell our products with an
    extensive subsidiary network in
    40 countries in North and Latin
    America, Europe, Middle East and
    Africa, Asia Pacific and China

•   We have a network of more than
    50    independent         distribution
    partners     covering     the    other
    countries.

•   We reach nearly 100,000 points
    of   sale    all   over   the    world
    including opticians, optometrists,
    ophthalmologists,         distribution
    chains,      department         stores,
    specialised retailers, licensors’
    own stores, duty free shops and
    sports shops

                                                                 : Direct Distribution
                                                                 : Indirect Distribution
                                                                 : Not covered

                                                                                           8
Update of the 2020 Group Business Plan - August 3, 2018 - Investor Relations
WHAT SAFILO STANDS FOR:                      Multi-segment Brand Portfolio

Fashion Luxury
                                    3 bn€
Retail price*: >200€

Premium, Contemporary & Lifestyle
                                    10 bn€
Retail price*: 80€ to 200€

Mass/cool (branded)
                                    2 bn€
Retail price*: 30€ to 80€

Private label
                                     3 bn€
Retail price*:
TODAY AGENDA

               •   An Attractive Eyewear Industry

               •   What Safilo stands for

               • Safilo in context

               •   Key Strategies

               •   Financial Targets

                                                    10
SAFILO IN CONTEXT

Key business drivers

1
                 • Strong and historical position in Developed Markets    M A R K ET        57%                   43%
 Geographic
                 • Opportunity to accelerate growth in Emerging Markets
      mix

                                                                          SA FIL O                 82%                   18%
2
    Product
                                                                                       Developed Markets   Emerging Markets
      mix

3
      Cost
    structure

 SOURCE: Safilo’s data in % on 2017 sales and management estimates                                                      11
SAFILO IN CONTEXT

Key business drivers

1
 Geographic
      mix

2                                                                                M A RKE T     33%                           67%
    Product       • Strong position in the Sunglasses business
      mix
                  • Opportunity to recover a stronghold in Prescription frames

                                                                                  SA FIL O                 65%                         35%

3
                                                                                             Sun & Other         Prescription frames
      Cost
    structure

 SOURCE: Safilo’s data in % on 2017 sales and management estimates                                                                       12
SAFILO IN CONTEXT

Key business drivers

1
 Geographic
      mix

2
    Product
      mix

                                                                      IND USTRY
                                                                     BE N CHM ARKS           40%               43%         9%
3
                 • Higher cost structure
      Cost
                 • Opportunity to significantly reduce costs and
    structure      improve profitability
                                                                           SA FIL O            50%                   40%        15%

                                                                                      COGS           Selling    G&A

 SOURCE: Safilo’s data in % on 2017 sales and management estimates                                                         13
TODAY AGENDA

               1 – An Attractive Eyewear Industry

               2 – What Safilo stands for

               3 – Safilo in context

               4 – Key Strategies

               5 – Financial Targets

                                                    14
KEY STRATEGIES

                        1     REIGNITE SALES GROWTH
                 with FOCUS on Key Brands, Geographies and Channels

     Leveraging world-class                   Embedding                        Putting the
    PRODUCT CREATION AND              DIGITAL AND E-COMMERCE            CONSUMER & CUSTOMER
         INNOVATION                  into our way of work and sell      at the heart of what we do

                        2     RECOVER OPERATING PERFORMANCE

                 Significantly REDUCE THE GROUP COST STRUCTURE
                              • Gross margin improvement from COGS savings
                                        • Overheads reduction

                          …with a Culture of AGILITY & SPEED
                                                                                                     15
KEY STRATEGIES AND IMPACTS
                                                                                                               Growth 2019-2020 (EUR Mio)

                                                                                                                   Sales        EBITDA
1                                                       •   Play multi-segment with core licensed/own brands
                              Multi-segment portfolio
                                                        •   Accelerate Growth in Premium and Contemporary
                                                        •   Catch growth in Emerging markets
                                 Geographies and        •   Recover growth in Developed markets
         REIGNITE                   channels                                                                   ca +2% CAGR
                                                        •   Start an omni-channel strategy                                     +10 +20
     SALES GROWTH                                                                                              ca +4% CAGR*

                                Product categories      •   Reconquer the Optical business

                                                        •   Guaranteed volumes to halve starting from
                                  Gucci business            Jan.’19 as per contract

2                                      COGS             •   COGS and Obsolescence savings                                        +30
                                                            to improve Gross Margin
    REDUCE THE COST                Obsolescence                                                                                  +10
       STRUCTURE

                                    Overheads           •   Extra program of Overhead savings to allow                           +30
                                                            significant recovery of operating profitability

                                                            Total impact                                                       +80 +90
                                                            Restructuring costs                                                  -25

CAGR*: excl. Gucci business
                                                                                                                                16
TODAY AGENDA

               •   An Attractive Eyewear Industry

               •   What Safilo stands for

               •   Safilo in context

               • Key Strategies
               •   Reignite Sales Growth

               •   Financial Targets

                                                    17
REIGNITE SALES GROWTH      1.1 Play our multi-segment portfolio

LICENSED BRAND PORTFOLIO                     Expected to grow MID-SINGLE DIGIT in the next 2Y

                                             Key drivers

                                             •   Fashion Luxury as our stronghold, behind the Group renowned
                                                 product creation skills, Made in Italy capacity and tailored-made
                                                 selective distribution

                                             •   Accelerated growth in the Premium, Contemporary and
                                                 Lifestyle segments:

                                                 • biggest part of today business

                                                 • attractive segment trends and profitability

                                                 • capabilities in Fashion Luxury to support growth of Premium

                                                 • clear success cases and potential in the licensed portfolio

                                                                                                            18
REIGNITE SALES GROWTH      1.1 Play our multi-segment portfolio

OWN CORE BRAND PORTFOLIO                     Expected to grow MID-SINGLE DIGIT in the next 2Y

                                             Key drivers

                                             •   Carrera & Polaroid:

                                                 • Clear design language and collection architecture, back to the
                                                   DNA of the brands

                                                 • Improve current in-store execution

                                                 • Attract millennials through our brand authenticity, empowered
                                                   by a new integrated digital strategy (e-commerce and
                                                   communication)

                                                 • Focused investments in key geographies

                                             •    Smith:

                                                 • Expand market leadership in NA core snow business, with
                                                   product innovation

                                                 • Expand sunglasses in NA, leveraging on ChromaPop™ lenses

                                                 • Selective expansion of snow business in Europe
                                                                                                         19
                                                 • Accelerate e-commerce in NA and Europe
REIGNITE SALES GROWTH                                                1.2 Catch growth in EMERGING MARKETS

EMERGING MARKETS                                                                                     Expected to grow HIGH-SINGLE digits in the next 2Y

                                                                                                       Key drivers

                                                                                                       •   Develop “Glocal” strategies:

                                                                                                           •   Increase Asian model product offering

                                                                                                           •   Leverage the optical strategy, tailored to Emerging markets

                                                                                                           •   Invest in locally relevant influencers and marketing
                                                                                                               campaigns

                                                                                                           •   Accelerate hybrid commercial model for wider geographical
                                                                                                               and in market coverage

Emerging markets comprise the regions of India, Middle East & Africa and Latin America (reported
within Rest of the World), Central Eastern Europe (reported within Europe), Greater China and APAC
(reported within Asia Pacific)                                                                                                                                        20
REIGNITE SALES GROWTH                       1.3 Recover growth in DEVELOPED MARKETS

DEVELOPED MARKETS*                                        Expected to grow LOW to MID-SINGLE digits in the next 2Y

                                                             Key drivers

                                                             •   Step up Service Levels and Customer care

                                                             •   Complete the commercial reorganization in North America

                                                             •   Digitalize the salesforce and exploit more our B2B platform

                                                             •   Enhance portfolio opportunities in optical across Europe

 *: North America and                                                                                                   21
    Western Europe (excl. Gucci business)
REIGNITE SALES GROWTH   1.4 Start an OMNI-CHANNEL strategy

E-COMMERCE BUSINESS                   Expected to grow HIGH-DOUBLE digits in the next 2Y
                                      Double its share of the total sales from 3% to 6% in 2020

                                         Key drivers

                                          •   E-commerce to develop a true omni-channel strategy:

                                              • New Carrera and Polaroid e-commerce, starting with
                                                Western Europe

                                              • New Smith e-commerce in Western Europe

                                              • Develop/accelerate partnerships with big marketplace
                                                players (e.g., YNAP, Amazon, Farfetch, JD.com)/ Internet
                                                pure players (e.g., Mr. Spex,)

                                                                                                    22
REIGNITE SALES GROWTH   1.5

OPTICAL BUSINESS              Expected to grow MID-SINGLE digits in the next 2Y
                              Grow its share on the total sales from 35% to 40% in 2020

                                Key drivers

                                 •   Broaden the optical category for all our key brands

                                 •   Strengthen and enlarge the product offer and price positioning

                                 •   Improve execution in after-sales service

                                 •   Make our Safilo optical specialist brand the essence of our 360°
                                     optical strategy

                                                                                              23
TODAY AGENDA

               •    An Attractive Eyewear Industry

               •    What Safilo stands for

               •    Safilo in context

               • Key Strategies
                   • Reignite Sales Growth
                   • Reduce Cost Structure

               •     Financial Targets

                                                     24
REDUCE COST STRUCTURE                           2.1 Cost of Goods Sold Savings (excl. Obsolescence)

Target 2019-20 COGS savings (EUR Mio)
                                                                       Key drivers

                                                                       PROCUREMENT
                                         ~30
                                                                       •   Partner closer with fewer suppliers
                                                                       •   Strengthen design-to-cost per segment

                                                                        MANUFACTURING
                                                                       •   Improve plant efficiency, adopting best-in-class industrial
                                                                           processes and technologies
                                                                       •   Redesign manufacturing flows and indirect structures

                                                                       DISTRIBUTION & LOGISTICS
   Procurement   Manufacturing   D&L    Total
                                                                       •   DC consolidation: from 10 in 2017 to 4 in 2020
                                                                       •   Optimization of transportation and warehousing flows

                                                                                                                             25
REDUCE COST STRUCTURE                            2.2 Obsolescence Cost Savings

Target 2019-20 Inventory DOH and savings (EUR Mio)
                                                                       Key drivers

                       DOH improvement: 50 days
                                                                       •   Lead Time Reduction behind better planning and
                                                                           flows optimization/ synchronization with suppliers and
                                          ~10
                                                                           within Safilo factories

                                                                       •   Supply Chain Reliability improvement based on better
                                                                           capacity planning and material stock management

   Lead time   Supply Chain   Forecast   Total
                                                                       •   Improvement of Forecast Accuracy by optimizing
                reliability   accuracy                                     safety stock and rationalizing SKU’s

                                                                                                                             26
REDUCE COST STRUCTURE                       2.3 Overhead Cost Savings

Target 2019-20 OVERHEAD savings (EUR Mio)
                                                               Key drivers

                                     ~30                       •   Work process simplification in central and regional offices

                                                               •   Agility and efficiency in transactional work, powered by
                                                                   completion of the Eyeway IT systems rollout

                                                               •   Detailed, zero-based budgeting effort on G&A

                                                               •   Indirect costs efficiencies through Eyebuy platform

   Simplification   G&A    ICT      Total

                                                                                                                     27
TODAY AGENDA

               •   An Attractive Eyewear Industry

               •   What Safilo stands for

               •   Safilo in context

               •   Key Strategies

               • Financial Targets

                                                    28
FINANCIAL TARGETS

                      2020 TARGETS*

                                              Sales back to growth from 2019
                    ~1.000 – 1.020 Mio€
  SALES GROWTH     ca + 2% CAGR vs 2018e      ca +4% CAGR vs 2018, excl. Gucci business

  EBITDA MARGIN                               Steady recovery of economic performance mainly driven
                    8% - 10% of Net Sales
    EXPANSION                                  by Gross margin improvement and Overhead savings

                                              Positive Cash Flow from 2019, enabled by economic
   CASH FLOW                                   results and better Net Working Capital
                  Net Debt/EBITDA: ca 1.5x
   GENERATION                                 Cumulated investments around EUR 80 Mio

* at 2018 FX

                                                                                                       29
REFINANCING

Safilo’s 150 Mio € Revolving Credit Facility (‘RCF”) is expiring on November 30, 2018 and the 150 Mio € Equity-
linked Bond (“ELB”) is maturing on 22 May 2019.

The Company is progressing in its discussions with financial institutions on the refinancing options, in the
context of the updated business plan. In addition, the Company is having discussions with its reference
shareholder, HAL Holding N.V (“HAL”), to which extent and under which terms and conditions HAL could
potentially provide financial support in the refinancing process. The company expects to complete the work
and all considerations regarding the final choice of financing options within the coming months and to launch
the actual refinancing project within the upcoming maturity timelines.

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