Safilo Group Closed Q1 2019 Up From Previous Year

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PADUA, Italy—Safilo Group S.p.A.’s board of directors has reviewed and approved Q1 2019 economic and financial key performance indicators. As previously reported in VMAIL, Safilo Group made the decision to proceed with the plan to sell its Solstice retail business to a third party, therefore 2019 management’s comments focus on the group’s continuing operations excluding Solstice. Safilo closed Q1 2019 with the net sales from continuing operations at €247.3 million, up 3.4 percent at current exchange rates and 0.6 percent at constant exchange rates (+0.8 percent on the wholesale business). When specifically looking at North America, net sales in the region for continuing operations were up in Q1 2019 at €88.9 million when compared to €83.0 million in Q1 2018.

Additionally, in the first quarter of 2019, Safilo’s adjusted EBITDA from continuing operations (pre-IFRS 16) reached €16.5 million and a margin of 6.7 percent. This increase marked a noteworthy operational improvement when compared to the adjusted EBITDA of €16.1 million recorded in Q1 2018, which included the income of €9.8 million for the early termination of the Gucci license.

According to the company, the group’s sales performance was supported by the gradual improvement of business trends in Europe, up 1.3 percent at constant exchange rates (+1.8 percent on the wholesale business) and North America recovering a certain stability (-0.6 percent at constant exchange rates), after the decrease recorded in the last two years. Performance in emerging markets was marked on the one hand by the good results of the Asia-Pacific region, up overall by 17.4 percent at constant exchange rates, and on the other by a weak business in the IMEA markets.

In Q1 2019, the company recorded the overall positive performance of its own core brands, driven by Smith and Polaroid in their core markets and product categories. Positive developments were also evident for a number of licensed brands playing in the fashion luxury and contemporary segments, Safilo stated.

“In addition, the Group elected to implement IFRS 16, applying the modified retrospective approach, where the cumulative effect of adopting the standard has been recognized at its relevant effective date on Jan. 1 2019, without the restatement of 2018 comparative information. IFRS 16 has a significant impact on the Group’s consolidated balance sheet side due to the right of use assets and lease liabilities that are now recognized for contracts in which the Group is a lessee. In the consolidated statement of income, the majority of the current operating rental costs is now presented as depreciation of right to use assets and interest expenses on the lease liabilities, with a material positive impact in terms of EBITDA and a minor effect on EBIT and net income,” the company stated.

In 2019, key financial indicators are commented on a pre IFRS 16 basis in order to support the transition and to allow proper comparison with the previous period.

When looking at the economic and financial highlights of the continuing operations, in Q1 2019, reported adjusted EBITDA of the continuing operations reached €20.0 million.

In Q1 2019, the group’s economic performance grew in fact 200 basis points at the Gross margin level, from 50.7 percent to 52.7 percent of net sales mainly due to higher plant efficiencies and lower obsolescence costs, and recovered additional 200 basis points at the operating expenses level following the ongoing progress in the overheads saving program.

According to the company, at the end of March 2019, total Group Net Debt on a pre IFRS 16 basis stood at €26.4 million compared to €166.0 million in Q1 2018 and €32.9 million at the end of December 2018. Q1 2019 Net Debt benefited of the remaining proceeds, received on Jan. 2, 2019 and equal to €17.7 million, from the share capital increase. Following the first application of the new IFRS 16 standard to Q1 2019, Group Net Debt stood at €105.7 million.