Update of the 2020 Group Business Plan August 3, 2018 DISCLAIMER - - PowerPoint PPT Presentation

Update of the 2020 Group Business Plan

August 3, 2018

This presentation may contain forward looking statements based on current expectations and proj ects of the Group in relation to future events. Due to their specific nature, these statements are subj ect 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.

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DISCLAIMER

• Key S

trategies

• An Attractive Eyewear Industry
• S

afilo in context

• Financial Targets

TODAY AGENDA

• What S

afilo stands for

2

• Key S

trategies

• An Attractive Eyewear Industry
• S

afilo in context

• Financial Targets

TODAY AGENDA

• What S

afilo stands for

3

4

AN ATTRACTIVE EYEWEAR INDUSTRY

S OURCE: Management estimates

Healthy Eyewear Industry

EUR bn, Wholesale value

2014 2020E 2017 16 18 21 ~+2% +4% ~+3%

• 4%

Developed Emerging CAGR ‘17-’20

~+5%

Channels Digital growing

• Eyewear dist ribut ion is fragmented, with a large part of

business in independent opticians

• Digital channels currently represent ̴ 5%

sales, growing fast, wit h online plat forms/ mult i brand websit es and specialist players leading the growt h. Omni-channel becomes more and more important Consumer behavior Impact of millennials Demographics >2bn people in need of eyecare solution

• The share of t he world’ s population aged 45+ will

increase significantly

• Increasing wealth in emerging markets will result in

more people gaining access to eyecare

• Health & wellness trends will cont inue to generate

interest in preventive/ prot ect ive eyecare

• Consumers are increasingly willing to pay for brands that
• ffer

distinguishing value. Traditional brand segmentation may lose relevance

• Millennials will be 45%
• f consumers in 2025 and will

influence consumption attitudes also for eyewear

• Key S

trategies

• An Attractive Eyewear Industry
• S

afilo in context

• Financial Targets

TODAY AGENDA

• What Safilo stands for

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WHAT SAFILO STANDS FOR

• 2nd Biggest Global Player
• Four own core brands representing 25%
• f the Group’s business
• Distinctive and recognized product design, creation and innovation capabilities,

supported by strong communication in reaching key influencers

• Know-how in licenses' management and ideal partner for high potential brands

within a multi-segment brand portfolio

• 140 years of eyewear manufacturing: Made in Italy capacity and craftmanship,

recently enhanced by smart automat ion and the latest technologies

• Direct distribution in 40 countries and wide network of global partners worldwide,

reaching ~100.000 points of sales

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Product Design and Manufacturing Footprint

• A new Product Creation Dep.

was created in late 2014 with the purpose to drive t he creat ion, development and innovation of t he most unique eyewear collections, operating from a network of international design studios

• Our products are manufactured

bot h in-house, in our own plants in Italy, China, S lovenia and the Unit ed S tat es and t hrough a network

• f

third-party manufacturers in Italy and Asia

• We tailor production to each

brand and market segment, from t he value-for-money t o the highest end atelier

• In 2017, we produced 40%
• f our

sale volumes in-house

WHAT SAFILO STANDS FOR:

Design studios: Padua, Milan, New York, Portland, Hong Kong Plants: North America

• S

alt Lake City

Europe

• Longarone (Italy)
• S

.Maria di S ala (Italy)

• Martignacco (Italy)
• Bergamo (Italy)
• Ormoz (S

lovenia)

Far East

• S

uzhou (RPC)

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Global Distribution Network

: Direct Distribution : Indirect Distribution : Not covered

• We sell our products wit h an

extensive subsidiary network in 40 countries in North and Latin America, Europe, Middle East and Africa, Asia Pacific and China

• We have a net work of more than

50 independent distribution partners covering the

• ther

countries.

• We reach nearly 100,000 points
• f

sale all

• ver

t he world including opt icians, optometrists,

• pht halmologists,

distribution chains, department stores, specialised retailers, licensors’

• wn stores, duty free shops and

sports shops

WHAT SAFILO STANDS FOR:

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Fashion Luxury Retail price*: >200€ Mass/cool (branded) Retail price*: 30€ to 80€ Private label Retail price*: <30 € Premium, Contemporary & Lifestyle Retail price*: 80€ to 200€

3 bn€ 10 bn€ 2 bn€ 3 bn€

S OURCE: Management estimates

* Recommended ret ail price

Multi-segment Brand Portfolio WHAT SAFILO STANDS FOR:

• Key S

trategies

• An Attractive Eyewear Industry
• Safilo in context
• Financial Targets

TODAY AGENDA

• What S

afilo stands for

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SAFILO IN CONTEXT

Cost structure Geographic mix

1

Product mix

3 2

• S

trong and historical position in Developed Markets

• Opportunity to accelerate growth in Emerging Markets

S OURCE: S afilo’ s data in %

• n 2017 sales and management estimates

Key business drivers

82% 57%

18% 43%

SA F I L O M A RKET

Developed Markets Emer ging Markets

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SAFILO IN CONTEXT

Cost structure

3

Geographic mix

1

Product mix

2

Key business drivers

• S

trong position in the S unglasses business

• Opportunity to recover a stronghold in Prescription frames

S OURCE: S afilo’ s data in %

• n 2017 sales and management estimates

65% 33% 35% 67%

SA F I L O M A RKET

S un & Ot her Pr escript ion frames

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SAFILO IN CONTEXT

• Higher cost structure
• Opportunity to significantly reduce costs and

improve profitability

Cost structure

3

Geographic mix

1

Product mix

2

S OURCE: S afilo’ s data in %

• n 2017 sales and management estimates

Key business drivers

50% 40% 40% 43% 15% 9%

SA F I L O I N D U ST RY BEN CH M ARKS

COGS S elling G&A

4 – Key Strategies

1 – An Attractive Eyewear Industry 3 – S afilo in context 5 – Financial Targets

TODAY AGENDA

2 – What S afilo stands for

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

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

S ignificantly REDUCE THE GROUP COS T S TRUCTURE

• Gross margin improvement from COGS

savings

• Overheads reduction

RECOVER OPERATING PERFORMANCE 2 … with a Culture of AGILITY & SPEED

16 REIGNITE SALES GROWTH

• COGS

and Obsolescence savings to improve Gross Margin

• Extra program of Overhead savings to allow

significant recovery of operating profitability

• Play multi-segment with core licensed/ own brands
• Accelerate Growth in Premium and Contemporary
• Reconquer the Optical business

Geographies and channels Product categories

REDUCE THE COST STRUCTURE

COGS Overheads Obsolescence Multi-segment portfolio

• Catch growth in Emerging markets
• Recover growth in Developed markets
• S

tart an omni-channel strategy

1 2

Gucci business

• Guaranteed volumes to halve starting from

Jan.’ 19 as per contract

Growth 2019-2020 (EUR Mio)

+30 +10

Sales EBITDA

+30 +10 +20 +80 +90

ca +2% CAGR

Total impact Restructuring costs

• 25

ca +4% CAGR*

CAGR*: excl. Gucci business

KEY STRATEGIES AND IMPACTS

• Key Strategies
• An Attractive Eyewear Industry
• S

afilo in context

• Financial Targets

TODAY AGENDA

• What S

afilo stands for

• Reignite Sales Growth

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1.1 Play our multi-segment portfolio Key drivers

REIGNITE SALES GROWTH

• Fashion Luxury as our stronghold, behind the Group renowned

product creation skills, Made in Italy capacity and tailored-made selective distribution

Expect ed t o grow MID-SINGLE DIGIT in the next 2Y

• 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 potent ial in the licensed portfolio

LICENSED BRAND PORTFOLIO

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1.1 Play our multi-segment portfolio

REIGNITE SALES GROWTH

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• Expand market leadership in NA core snow business, with

product innovation

• Expand sunglasses in NA, leveraging on ChromaPop™

lenses

• S

elective expansion of snow business in Europe

• Accelerate e-commerce in NA and Europe
• 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

OWN CORE BRAND PORTFOLIO

Key drivers

• Carrera & Polaroid:
• Smith:

Expect ed t o grow MID-SINGLE DIGIT in the next 2Y

• Invest in locally relevant influencers and marketing

campaigns

• Increase Asian model product offering
• Accelerate hybrid commercial model for wider geographical

and in market coverage

• Leverage the optical strategy, tailored to Emerging markets

1.2 Catch growth in EMERGING MARKETS

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)

EMERGING MARKETS

Expect ed t o grow HIGH-SINGLE digits in the next 2Y

Key drivers

• Develop “Glocal” strategies:

REIGNITE SALES GROWTH

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• S

tep up Service Levels and Customer care

• Enhance portfolio opportunities in optical across Europe
• Complete the commercial reorganization in North America
• Digitalize the salesforce and exploit more our B2B platform

1.3

Expect ed t o grow LOW to MID-SINGLE digits in the next 2Y

Key drivers DEVELOPED MARKETS*

REIGNITE SALES GROWTH

*: North America and Western Europe (excl. Gucci business)

Recover growth in DEVELOPED MARKETS

• Develop/ accelerate partnerships with big marketplace

players (e.g., YNAP, Amazon, Farfetch, JD.com)/ Internet pure players (e.g., Mr. S pex,)

• New Carrera and Polaroid e-commerce, starting with

Western Europe

• New Smith e-commerce in Western Europe
• E-commerce to develop a true omni-channel strategy:

1.4 S

tart an OMNI-CHANNEL strategy E-COMMERCE BUSINESS

Expect ed t o grow HIGH-DOUBLE digits in the next 2Y

Double its share of the total sales from 3% to 6% in 2020 Key drivers

REIGNITE SALES GROWTH

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• Broaden the optical category for all our key brands
• Improve execution in after-sales service

1.5

OPTICAL BUSINESS Grow its share on the total sales from 35% to 40% in 2020

Expect ed t o grow MID-SINGLE digits in the next 2Y

Key drivers

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

REIGNITE SALES GROWTH

• S

trengthen and enlarge the product offer and price positioning

• Key Strategies
• An Attractive Eyewear Industry
• S

afilo in context

• Financial Targets

TODAY AGENDA

• What S

afilo stands for

• Reignite Sales Growth
• Reduce Cost Structure

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• Improve plant efficiency, adopting best-in-class industrial

processes and technologies

• Redesign manufacturing flows and indirect structures
• Partner closer with fewer suppliers
• S

trengthen design-to-cost per segment

Total Procurement Manufact uring D&L

2.1

Cost of Goods S

• ld S

avings (excl. Obsolescence)

Target 2019-20 COGS savings (EUR Mio)

Key drivers

PROCUREMENT MANUFACTURING

~30

DISTRIBUTION & LOGISTICS

• DC consolidation: from 10 in 2017 to 4 in 2020
• Optimization of transportation and warehousing flows

REDUCE COST STRUCTURE

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2.2

Obsolescence Cost S avings

S upply Chain reliability Forecast accuracy

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

Total Lead time ~10

DOH improvement: 50 days

• Lead Time Reduction behind better planning and

flows optimization/ synchronization with suppliers and within S afilo factories

• Supply Chain Reliability improvement based on better

capacity planning and material stock management

• Improvement of Forecast Accuracy by optimizing

safety stock and rationalizing S KU’s

REDUCE COST STRUCTURE

Key drivers

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2.3

Overhead Cost S avings

Target 2019-20 OVERHEAD savings (EUR Mio)

• 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

Total S implificat ion G&A ICT ~30

REDUCE COST STRUCTURE

Key drivers

• Key S

trategies

• An Attractive Eyewear Industry
• S

afilo in context

• Financial Targets

TODAY AGENDA

• What S

afilo stands for

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~1.000 – 1.020 Mio€ ca + 2% CAGR vs 2018e

• Sales back to growth from 2019
• ca +4% CAGR vs 2018, excl. Gucci business

FINANCIAL TARGETS

• Steady recovery of economic performance mainly driven

by Gross margin improvement and Overhead savings

• Positive Cash Flow from 2019, enabled by economic

results and better Net Working Capital

• Cumulated investments around EUR 80 Mio

SALES GROWTH EBITDA MARGIN EXPANSION CASH FLOW GENERATION

2020 TARGETS*

* at 2018 FX

8%

• 10%
• f Net Sales

Net Debt/EBITDA: ca 1.5x

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REFINANCING

S afilo’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, t he 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 proj ect within the upcoming maturity timelines.