- Revenue up 13.4% excluding the currency
effect
- Adjusted1 contribution from operations2
up 15%
- Major progress in fast-growing
countries
- Transformational acquisitions in a
number of growth activities
- Successful integration of Transitions
Optical
- Powerful innovations and stepped-up
consumer marketing
- Free cash flow3 up 47% to €800
million
- Dividend up 8.5%, reflecting strong
confidence in the future
Regulatory News:
The Board of Directors of Essilor International (Paris:EI) met
yesterday to approve the 2014 financial statements. The financial
statements have been audited and the auditors are currently in the
process of issuing their report.
Financial Highlights
€ millions
2014 adjusted1 2013
adjusted1 % change Revenue
5,670 5,065 +12.0%
Contribution from operations2
1,057 920 +15.0%
(% of revenue)
18.6%
18.2%
Operating profit
989 857
+15.4% Profit attributable to equity holders
642
603 +6.5% Earnings per share (in €)
3.05 2.87 +6.3%
Hubert Sagnières, Chairman and Chief Executive Officer of
Essilor, said: "The quickening pace of growth throughout the year
culminated in an excellent performance in the fourth quarter. Our
mission of improving lives by improving sight has expanded the
Company’s playing field and led in 2014 to transformational
acquisitions in the Photochromic, Sunwear and Online businesses.
While remaining focused on its core ophthalmic optics business,
Essilor is increasingly capitalizing on the interconnections
between all its activities and moving closer to the consumer in the
marketing of its brands and solutions. In a structurally expanding
ophthalmic optics market and with a more favorable currency
environment, 2015 promises to be another year of strong growth in
revenue and contribution from operations. Our teams are fully
engaged and energized about maintaining this momentum over the
medium term."
In a mixed economic environment, Essilor successfully deployed a
strategy of broadening its playing field, with the sustained
support of its original model of innovation and partnerships. In
2014, this process drove an increase in the Company's presence in
corrective lenses and in the percentage of revenue coming from
North America, to 45%, and from the fast-growing countries, to 22%.
Essilor deepened its presence in the Photochromic segment by
completing the acquisition of the remaining 51% of Transitions
Optical – its largest acquisition to date – and in the Online
business with the acquisition of Coastal.com, a major e-tailer of
optical products. Essilor also developed a sunglass offering
combining the Company’s premium sunlens production expertise and
FGX International's distribution capabilities. The sunwear business
was also strengthened by the acquisition of the mid-range Bolon®
and Molsion® brands in China at the end of 2013, and of the Costa®
brand in the US performance sunglass segment at the beginning of
2014.
The 2014 results were also shaped by the following factors:
- The sustained success of the Company’s
innovations, including the Crizal®, Varilux® S series™,
Transitions® Signature™ and Xperio® lenses.
- The improvement in like-for-like
revenue growth, to 3.7%. This was driven by the Lenses &
Optical Instruments division and gained steady momentum quarter
after quarter to hit 5.0% in the final quarter of the year.
- A historically high adjusted4
contribution5 from operations, at 18.6% of revenue, illustrating
Essilor's ability to use its operating leverage and the synergies
from the acquired companies to finance its additional marketing
expenditure.
- The increase in consumer marketing
spend, which rose to around €150 million on a full-year basis,
including the Photochromic, Sunwear and Online businesses.
- The completion of twelve new
acquisitions representing total full-year revenue of €525
million.
- The growth in business with large
accounts and the increase in the number of integrated supply-chain
contracts in every region around the world.
Dividend
In light of its confidence in the Company's outlook, the Board
of Directors recommend that shareholders at the Annual Meeting on
May 5, 2015 approve the payment of a dividend of €1.02 per share,
an increase of 8.5% compared with the 2013 dividend. The pay-out
ratio is increasing and now stands at 33.7%. The dividend will be
paid as from May 21, 2015.
Outlook
In 2015, Essilor will step-up its growth momentum by
strengthening in three main businesses: Corrective lenses, Sunwear,
and Online sales. It will step up its consumer marketing spend,
which should total almost €200 million across the business base,
and will continue to develop all the synergies generated from the
acquisitions completed in 2014. Lastly, it will continue to expand
in fast-growing countries and enter new territories.
Essilor expects to deliver revenue growth exceeding 4.5% on a
like-for-like basis in 2015. Barring any new strategic
acquisitions, the Company is targeting revenue growth of between 8%
and 11% (excluding the currency effect) and an adjusted6
contribution from operations7 of at least 18.8% of revenue.
Over the medium term, the broadening of the Company’s playing
field and its increasing proximity with consumers should continue
to drive faster like-for-like revenue growth and boost
profitability.
Practical information
A meeting with analysts will be held in Paris today, February
19, at 10:30 am.
The meeting webcast may be viewed live or as a recording at:
http://hosting.3sens.com/Essilor/20150219-37C37D44/en/
The presentation may be viewed at:
http://www.essilor.com/en/Investors/Pages/PublicationsDownloads.aspx
------------------------
Forthcoming investor events
April 21, 2015: First-quarter 2015 revenue
May 5, 2015: Annual Shareholders' Meeting at 10:30 am at the
Palais des Congrès Paris Convention Center
About Essilor
The world's leading ophthalmic optics company, Essilor designs,
manufactures and markets a wide range of lenses to improve and
protect eyesight. Its mission is to improve lives by improving
sight. To fulfill it, Essilor allocates more than €150 million to
research and innovation every year, in a commitment to continuously
bringing new, more effective products to market. Its flagship
brands are Varilux®, Crizal®, Transitions®, Definity®, Xperio®,
Optifog™, Foster Grant®, Bolon® and Costa®. It also develops
and markets equipment, instruments and services for eyecare
professionals.
Essilor reported consolidated revenue of nearly €5.7 billion in
2014 and employs 58,000 people. It markets its products in more
than 100 countries and has 33 plants, 490 prescription laboratories
and edging facilities, as well as several research and development
centers around the world. For more information, please visit
www.essilor.com.
The Essilor share trades on the NYSE Euronext Paris market and
is included in the Euro Stoxx 50 and CAC 40 indices.
Codes and symbols: ISIN: FR0000121667; Reuters: ESSI.PA;
Bloomberg: EI:FP.
________________
1 Adjusted for non-recurring items related mainly to the
Transitions Optical, Coastal.com and Costa acquisitions in 2014 and
to the Xiamen Yarui Optical (Bolon) acquisition in 2013. Revenue
data are not adjusted.2 Operating profit before compensation costs
for share-based payments, restructuring costs, other income and
expenses, and goodwill impairment.3 Net cash from operating
activities less the change in working capital requirement and
purchases of property, plant and equipment and intangible assets,
according to the IFRS consolidated cash flow statement.4 Adjusted
for non-recurring items related mainly to the Transitions Optical,
Coastal.com and Costa acquisitions in 2014 and to the Xiamen Yarui
Optical (Bolon) acquisition in 2013. Revenue data are not
adjusted.5 Operating profit before compensation costs for
share-based payments, restructuring costs, other income and
expenses, and goodwill impairment.6 Adjusted for non-recurring
items related mainly to the Transitions Optical, Coastal.com and
Costa acquisitions in 2014 and to the Xiamen Yarui Optical (Bolon)
acquisition in 2013. Revenue data are not adjusted.7 Operating
profit before compensation costs for share-based payments,
restructuring costs, other income and expenses, and goodwill
impairment.
EXCERPTS FROM THE MANAGEMENT REPORT BY THE
BOARD OF DIRECTORS – FEBRUARY 18, 2015
Consolidated revenue
€ millions
2014 2013
% Change
(reported)
% Change
(like-for-like)
Change in the
scope of
consolidation
Currency
effect
Lenses & Optical Instruments 4,970.0
4,505.0 + 10.3% + 4.3% + 7.6% -
1.6% North America
2,038.2 1,770.4 +
15.1% + 5.0% + 10.9% - 0.8% Europe
1,653.0 1,571.5 + 5.2% + 0.1% +
5.1% + 0.1% Asia/Pacific/Middle East/Africa
898.0 812.2 + 10.6% + 8.2 % +
5.7% - 3.4% Latin America
380.8 350.8
+ 8.6% + 10.8% + 6.7% - 8.9%
Equipment 197.3 204.9 - 3.7%
- 1.8% - 1.5% - 0.4%
Sunglasses &
Readers 503.0 354.8 + 41.7%
- 1.0% + 42.9% - 0.2%
TOTAL
5,670.3 5,064.7 + 12.0%
+ 3.7% + 9.7% - 1.4%
In 2014, consolidated revenue totaled €5,670 million, an
increase of 13.4% over the previous year.
Like-for-like sales growth was 3.7% for the year, reflecting an
improvement in activity between the first half (up 3.0 %) and the
second (up 4.4 %).
The positive 9.7% impact of changes in scope of consolidation
was attributable to the contribution of (i) organic acquisitions1
(4.9%) and (ii) strategic acquisitions (4.8%) in the form of
Transitions Optical and Coastal.com.
An overall adverse 1.4% currency effect, reflecting the sharp
increase in the euro against the main billing currencies in the
first half was partially offset by the upturn in the dollar against
the euro late in the year.
LENSES & OPTICAL
INSTRUMENTS
The Lenses & Optical Instruments division delivered a 4.3%
like-for-like gain for the year, sharply outpacing the 1.8% growth
reported in 2013. This renewed vitality was led by the success of
Essilor solutions with optical chains and independent eyecare
professionals alike, firm markets in the fast-growing economies and
the deployment of major consumer advertising campaigns.
North America
Revenue rose 5% like-for-like in North America on the back of
strong new product sales and successful consumer marketing
campaigns.
Positions were strengthened in the United States. The
quickening pace of advertising campaign roll-outs spurred faster
sales of the leading Essilor brands in four main product
categories: anti-reflective lenses (Crizal UV and Crizal
Prevencia), progressive lenses (Varilux, particularly the Varilux S
Series), photochromic lenses (Transitions) and polarized lenses
(Xperio). The contact lens distribution business also enjoyed
robust growth, driven by online sales and market share gains among
independent optometrists. On the distribution side, business with
Managed Care organizations rose after the supply contract with the
nation's number two provider was broadened, with full deployment
scheduled for completion in first-half 2015. The contract is also
having a recurring positive knock-on effect on business with
independent optometrists, as the eye care professionals affiliated
with this managed care network can also use their access to Essilor
products and laboratories for purchases not covered by insurance.
Business with the optical chains was more mixed, although there
were further gains with a number of large accounts. The online
business (FramesDirect, EyeBuyDirect and Coastal.com) continued to
enjoy fast growth.
Growth in Canada is being supported by several factors,
including the effective consumer advertising campaigns for the
Varilux, Crizal, Transitions and Xperio brands, the impact of the
"perfect pair" offer, which is driving the emergence of the
prescription sunglasses category at independent opticians, and the
Company's widening presence in the mass retailing channel.
Expansion in the mid-tier is gathering pace with the introduction
of Kodak lenses and the good momentum of the recent partnership
with Riverside Optical.
Europe
Revenue rose by just 0.1% like-for-like in Europe, held back by
a contract loss in the second half of 2013. Excluding this factor,
which primarily impacted the German-speaking and Benelux regions,
business was lifted by the sustained growth in certain markets and
the success of new product launches, led by the Crizal Prevencia
lens.
In a generally improving economy, operations in Southern Europe
enjoyed a clear upturn in performance. In particular, revenue in
Spain benefited from a new contract with a leading national optical
chain and the success of its advertising campaigns. In the United
Kingdom, business was supported by the smooth execution of the
integrated supply chain contract with a very large optical chain
and firm demand from independent eyecare professionals. Led by
operations in Poland and the Czech Republic, revenue from the
Eastern European countries continued on a solid upward trend
overall. Growth also remained robust in Russia, thanks to an
effective multi-network distribution strategy.
The situation gradually turned around in France after a rough
start to the year. The success of high value-added products like
Crizal Prevencia and Varilux S series, boosted by an assertive
consumer advertising campaign and the close fit among the various
distribution networks, helped to attenuate the adverse impact of a
shifting regulatory environment.
Asia/Pacific/Middle East/Africa
Revenue from the Asia/Pacific/Middle East/Africa region rose by
8.2% like-for-like, led by a solid performance in the fast-growing
countries of the region.
Operations in India had an excellent year, with a more than 20%
like-for-like surge in revenue, from both domestic and export
sales. Business benefited from Crizal's powerful brand identity,
the sharp growth in sales of Varilux and other progressive lens,
Kodak's growing success in the mid-tier and the continued shift
from glass to plastic lenses. Together, these factors are enabling
Essilor to maintain its forward momentum and gain new market
share.
Operations in China continued to deliver double-digit
like-for-like growth in domestic sales. The E-SPF UV protection
index is being positively impacted by the consumer advertising
campaigns and its introduction in the mid-tier by a large number of
partners. Kodak lenses performed well following their market
launch, while demand for photochromic lenses rose during the year.
Lastly, a good business relationship has been initiated with the
country's leading optical chain. These solid results improved
Essilor's positions in the domestic market, thereby helping to
offset a decline in export sales.
Business in Southeast Asia is gathering speed, while operations
in South Korea are suffering from a country-specific slowdown in
demand due to the lengthening of the glasses renewal rate.
In the Africa/Middle East region, business is trending upwards,
with particularly strong growth in South Africa.
In the region's mature markets, business was stable in Japan
despite the market decline spurred by changes in the economic and
tax environments. The Group’s performance in Australia and New
Zealand was positive thanks to the success of the Crizal UV lens,
whose sales were boosted by consumer advertising campaigns.
Latin America
Revenue growth accelerated in Latin America, to 10.8%
like-for-like, despite the sharp economic slowdown in the region,
where Essilor is reaping the benefits of its strategy to innovate
and develop its distribution networks.
Sales in Brazil were led by the successful market launch of
Varilux S series, the sharp increase in demand for Crizal lenses
(supported by a nationwide media campaign), and double-digit volume
growth for Transitions photochromic lenses. In the mid-tier, the
year was shaped by the gradual introduction of Kodak-brand lenses
across the country, with volumes increasing significantly in
Brazil’s southern states where the launch was underpinned by a
consumer advertising campaign.
Essilor generated further robust growth in Colombia by
continuing to leverage its partnership with prescription laboratory
Servioptica, thereby ensuring a sustained improvement in sales of
Varilux, Crizal and Transitions lenses. In addition, Essilor
strengthened its presence in this fast-growing market by initiating
the launch of Nikon-branded lenses. Business was also very brisk in
Chile. In Mexico, growth was held back by an unfavorable economic
and political environment. Lastly, countries served by third-party
distributors delivered a solid performance overall.
Instruments
The Instruments division continued to expand during the year,
with revenue rising 4.1% like-for-like thanks to the lens finishing
and optometry businesses. New share was gained in the edging
market, supported by a solid improvement in the product mix and
growth in edging system sales volumes. Business in Europe was
buoyed by the successful market launch of the second-generation
premium edger, Mr. Blue 2.0, which features custom lens engraving.
In the fast-growing countries, sales were driven by the opening of
new optical stores and the steady improvement in product mix. This
was particularly the case in China, where the mid-range NeKsia
edger featuring improved lens centering and blocking is gaining
share from Triplex, the entry-level model. Sales enjoyed solid
growth in Italy, Spain and Japan, as well as in Turkey where a
majority stake was acquired in Esel Optik, Essilor’s long-standing
distribution partner for instruments.
Optometry sales rose sharply on the launch of a new line of
mid-tier instruments offering the possibility of performing dilated
fundus examinations. Sales of in-store measuring devices slowed
during the year.
Equipment
Equipment division revenue declined by 1.8% like-for-like for
the year, but recovered strongly in the fourth quarter, which saw a
like-for-like increase of 7.2%. Throughout 2014, the division’s
reported growth continued to be impacted by the recognition of
sales to acquired group companies as intra-group revenue. In spite
of this, Latin America reported a sharp revenue increase, thanks to
the success of surfacing microlines for small laboratories and
coating machines for industrial applications. Revenue was also up
in Asia. Revenue remained stable in North America, despite a high
basis of comparison reflecting the effect of an equipment contract
with a major optical chain in 2013. These trends were nonetheless
insufficient to offset the decline in demand for digital surfacing
machines in Europe and North America. The solid fourth-quarter
performance was attributable to the resounding success of the green
alternative to the traditional alloy ophthalmic blocking process,
for which there is no rival product on the market to date. This
unique offering, as well as a pipeline of new products and
services, is helping to rebuild the order backlog, which should
drive a further revenue improvement over the coming quarters.
Sunglasses & Readers
In 2014, the Sunglasses & Readers division stepped up its
strategy of expanding in the global marketplace and moving its
product offering upmarket. New companies positioned in very
fast-growing sunglasses segments were integrated over the year,
including Costa, a major player in the US performance sunglasses
market, and Xiamen Yarui Optical, whose expansion is being driven
by the growing success of the Bolon and Molsion brands in China.
Both of these companies delivered strong growth in line with the
business plans.
Given that Xiamen Yarui Optical and Costa have been consolidated
since, respectively, November 1, 2013 and February 1, 2014, the 1%
like-for-like decline in division revenue was solely attributable
to the operating difficulties encountered by FGX in North America.
At a time of rising consumer sales, business was dampened by
extensive inventory drawdowns by leading customers, especially in
the second half, the postponement of certain eyewear line
refreshes, and the loss of space at a large account. Outside North
America, FGX enjoyed robust business, with double-digit gains in
Latin America and strong growth in Europe.
Consolidated revenue – fourth quarter 2014
€ millions
2014 2013
% Change
(reported)
% Change
(like-for-like)
Change in the
scope of
consolidation
Currency
effect
Lenses & Optical Instruments 1,276.7
1,094.2 + 16.7% + 4.7% + 8.3% +
3.7% North America
526.8 416.1 + 26.6%
+ 4.7% + 13.5% + 8.5% Europe
418.2 393.1 + 6.4% + 1.0% + 5.5%
- 0.1% Asia/Pacific/Middle East/Africa
230.9
196.8 + 17.3% + 8.0% + 4.7% +
4.6 % Latin America
100.8 88.2 + 14.3%
+ 13.7% + 4.5% - 3.9%
Equipment
66.2 60.2 + 10.0% + 7.2% - 1.2%
+ 4.0%
Sunglasses & Readers 132.0
97.3 + 35.6% + 6.7% + 22.8% +
6.2%
TOTAL 1,474.9 1,251.7
+ 17.8% + 5.0% + 9.0%
+ 3.9%
Revenue rose by 17.8% as reported in the fourth quarter, with a
further sequential increase in like-for-like growth to 5%; led by
sustained strong lens sales and a significant rebound in the
Sunglasses & Readers and Equipment divisions. The 9% positive
impact from changes in the scope of consolidation primarily
reflected the 6.2% contribution from Transitions Optical and
Coastal.com.
Reported growth was also lifted by the 3.9% positive currency
effect, primarily from the appreciation of the dollar against the
euro.
By region and division, the period saw:
- Sustained strong demand in the United
State and Canada.
- A good performance in certain European
countries (Spain, United Kingdom and Eastern Europe) in a
challenging economic environment.
- Robust sales in the fast-growing
countries in the Asia-Pacific/Middle East/Africa region and Latin
America.
- A rebound in the Sunglasses &
Readers division, led by Bolon.
- The Equipment division's successful
market introduction of the new blocking technology.
ACQUISITIONS AND
PARTNERSHIPS
In 2014, Essilor pursued its acquisitions and partnerships
strategy, acquiring or increasing its stakes in 12 companies,
representing around €525 million in annual revenue.
These included Transitions Optical in photochromic lenses,
Coastal.com in optical products e-tailing, Costa in
high-performance sunglasses, and the owner of Chinese sunglasses
brand, Prosun.
In France, a majority interest was acquired in Infield Safety, a
prescription safety eyewear wholesaler with around €2.5 million in
annual revenue that will be consolidated in 2015.
LAUNCH OF THE VISION FOR
LIFETM PROGRAM
Essilor has announced the creation of the Vision For Life
program, a pioneering step in the Company’s mission to improve
lives by improving sight. The group has committed €30 million to
this initiative, making it the largest global strategic giving
program dedicated to eliminating Uncorrected Refractive Error
(URE). It aims to accelerate innovative initiatives targeting poor
vision through awareness-raising, capacity-building and the
creation of basic vision care infrastructure.
CONDENSED STATEMENT OF
INCOME
The published 2014 financial statement contain several
non-recurring items. In order to facilitate understanding of its
operating performance, Essilor publishes financial statements that
are adjusted for these items. Most of these adjustments are
purely accounting related with no impact on cash.
Reported Statement of Income/Adjusted Statement of Income
€ millions
2014
Adjusted(b)
Non-recurring
items(c)
2014
Reported
2013
Reported
Revenue 5,670 -- 5,670 5,065
Contribution from operations (a)
1,057 (15) 1,043 917
(% of revenue)
18.6%
18.4%
18.1%
Other income (expense), net (68) 247 179
(73) Operating profit 989 232 1,222
843 Net profit 702 284 986 646 Attributable to equity
holders of Essilor International 642 288 929 593
(% of revenue)
11.3%
--
16.4%
11.7%
Earnings per share (in €) 3.05 1.37 4.41
2.82
(a) Operating profit before compensation costs for share-based
payment plans, restructuring costs, other income and expenses, and
goodwill impairment. Adjusted for €15 million, of which €13 million
step-up on inventories stemming from major acquisitions
(Transitions Optical, Costa and Xiamen Yarui Optical)
(b) Adjusted for non-recurring items related mainly to the
Transitions Optical, Coastal.com and Costa acquisitions in 2014 and
to the Xiamen Yarui Optical (Bolon) acquisition in 2013. Revenue
data are not adjusted.
(c) Non-recurring items primarily include the €544-million gain
recognized on the full-consolidation of Transitions Optical, in
application of IFRS 3 (revised), offset by (i) €118 million in
impairment losses on property, plant and equipment, intangible
assets and goodwill, (ii) €28 million in technical expense
adjustments arising from the full-consolidation of Transitions
Optical, (iii) €17 million in acquisitions costs, (iv) €54 million
in restructuring costs arising from plans to unleash
acquisition-related synergies, (v) €50 million in contingent
consideration payments and adjustments to other provisions for
contingencies, and (vi) the €30-million contribution to the Vision
for LifeTM programme.
The following tables and comments concern the adjusted
statement of income.
Adjusted Statement of Income
€ millions
2014
Adjusted(b)
2013
Adjusted (c)
Change Revenue 5,670 5,065
+12.0% Gross profit
(% of revenue)
3,328
58.7%
2,841
56.1%
+17.1%
--
Operating expenses 2,271 1,921 +18.2% EBITDA
(d)
(% of revenue)
1,365
24.1%
1,173
23.2%
+16.4%
--
Contribution from operations (a)
(% of revenue)
1,057
18.6%
920
18.2%
+15%
--
Operating profit 989 857 +15.4% Net profit
702 657 + 6.9% Attributable to equity holders
of 642 603 + 6.5% Essilor International
(% of revenue)
11.3%
11.9%
--
Earnings per share (in €) 3.05 2.87 + 6.3%
(a) Operating profit before compensation costs for share-based
payment plans, restructuring costs, other income and expenses, and
goodwill impairment.
(b) Adjusted for non-recurring items related mainly to the
Transitions Optical, Coastal.com and Costa acquisitions in 2014 and
to the Xiamen Yarui Optical (Bolon) acquisition in 2013. Revenue
data are not adjusted.
(c) The 2013 income statement has been adjusted for €3 million
in contribution from operations and gross profit, corresponding to
step-up on inventories from the acquisition of Xiamen Yarui
Optical, and for a €10-million expense, net of tax, in other
expenses.
(d) Corresponding to adjusted contribution from operations
before recurring depreciation and amortization.
ADJUSTED CONTRIBUTION
FROM OPERATIONS: 18.6% OF REVENUE
Higher adjusted gross margin
Adjusted gross profit (revenue less cost of sales) stood at
€3,328 million for the year, representing 58.7 % of revenue, versus
56.1 % in 2013. The improvement mainly reflects the contribution
from Transitions Optical.
Higher adjusted contribution from operations
The adjusted contribution margin widened by 40 basis points, of
which:
- 10 basis points from the synergy gains arising on the
integration of Transitions Optical, partially offset by a
reinvestment in advertising.
- 30 basis points from the accretive impact of the Transitions
Optical and Xiamen Yarui Optical acquisitions, partially offset by
the dilutive impact from Coastal.com.
Adjusted operating expenses up 18.2 % to €2,271
million
Operating expenses amounted to 40.0% of revenue, versus 37.9% in
2013. The increase came both from the consolidation of the year's
acquisitions (especially Transitions Optical) and from the higher
media spend.
These expenses included:
- €188 million in R&D and engineering
costs, versus €164 million in 2013.
- €1,367 million in selling and
distribution costs, up from €1,118 million in 2013 as a result of
(i) the costs of launching new products, such as Transitions' new
generation photochromic lenses marketed under the Signature brand
and (ii) a strategic increase in media spend to spur faster sales
of the Varilux, Crizal, Transitions, Xperio and Kodak brands in the
main geographic markets. Excluding Transitions Optical, Costa,
Coastal.com and Xiamen Yarui Optical, these costs increased by 5.3%
in 2014.
Adjusted operating profit up 15.4 % to €989 million or 17.4%
of revenue
Adjusted "Other income and expenses from operations" and "Gains
and losses on asset disposals" together represented a net expense
of €68 million versus an expense of €63 million 2013. It
covered:
- Charges to restructuring provisions in
a total amount of €22 million, mainly related to the
rationalization of the prescription laboratory network in
Europe.
- Compensation costs for shared-based
payments (in particular performance share plans), totaling €39
million.
- Other expenses in an amount of €7
million.
Adjusted finance costs and other financial income and
expenses, net
This item rose to a net cost of €44 million from €20 million in
2013, due to the increase in interest costs following the debt
taken on to finance the Transitions Optical, Costa, Xiamen Yarui
Optical (Bolon) and Coastal.com acquisitions.
Adjusted attributable profit up 6.5% to €642 million
Profit attributable to equity holders of Essilor International
is stated after:
- €246 million in adjusted income tax
expense, representing an adjusted effective tax rate of 26%
compared with 24.1% in 2013. Most of the increase resulted from
changes in the scope of consolidation and the increase in business
in North America.
- €3 million in the share of profits of
associates, corresponding to Transitions Optical's contribution in
first-quarter 2014. Last year, when Transitions was accounted for
by the equity method over the full year, the share of profits of
associates stood at €22 million.
- €60 million in non-controlling
interests, up from €54 million in 2013 due to the non-controlling
interests in companies newly consolidated in 2014, especially
Xiamen Yarui Optical (Bolon).
Adjusted earnings per share rose 6.3% to €3.05.
FREE CASH
FLOW2: UP
47%
Operating cash flow3 grew at the same rate as revenue, rising
12%, and was sufficient to finance the dividends paid to
shareholders, the capital expenditure program and part of the
purchases of financial assets.
Capital expenditure and investments
Totaling €232 million in 2014, purchases of property, plant and
equipment and intangible assets covered capital expenditure to
support the Company's development and the completion of several new
buildings, including the regional headquarters in Singapore and the
Sunglasses & Readers division's Rhode Island distribution
center in the United States. These outlays amounted to €297 million
in 2013, when they included several exceptional transactions such
as the acquisition of the Kodak license and the construction of the
new R&D center in France.
Financial investments for the year came to €1,851 million,
including the purchases of Transitions Optical, Costa and
Coastal.com.
Lastly, €36 million was invested in the buyback of 469,425
Essilor shares to offset part of the dilution from the issuance of
shares under share-based payment plans.
Working capital requirement
Working capital requirement declined by €10 million in 2014,
thanks primarily to tight inventory management and items related to
accrued taxes and personnel expenses.
Free cash flow1
In the end, capital expenditure discipline helped to increase
free cash flow2 by 46.5% to €800 million for the year.
Consolidated net debt ended 2014 at €1,793 million or 1.3 times
consolidated EBITDA. This illustrates the rapid deleverage over the
second half from a net debt of €2,166 million reported at June 30,
2014 in the wake of the acquisitions of Transitions Optical,
Coastal.com and Costa.
Acquisitions during the year were primarily financed by the
€800-million issue of seven and ten-year bonds and by a
$450-million bank loan.
CASH FLOW
STATEMENT
€ millions
Net cash from operations(before change in WCR)
1,022 Capital expenditure
232 Change in WCR 10
Dividends 228 Proceeds from share issues 67
Acquisition of investments,net of
disposals* 1,851 Reported change in net debt 1,424
Purchases of treasury stock
36
Other** 176
*Financial investments net of cash acquired, plus debt of newly
acquired companies**Other items include the positive €167-million
currency effect.
Appendix: Consolidated Revenue by
Quarter (€ millions)
2014 2013 First
Quarter
Lenses & Optical Instruments 1,160
1,149
467 463
400 402
- Asia/Pacific/Middle East/Africa
211 205
82 79
Equipment
39 42
Sunglasses &
Readers 124 85
TOTAL First Quarter 1,323
1,276 Second Quarter
Lenses & Optical
Instruments 1,259
1,148
518 452
426 400
- Asia/Pacific/Middle East/Africa
222 203
94 93
Equipment
46 50
Sunglasses &
Readers 152 102
TOTAL Second Quarter 1,457
1,300 Third Quarter
Lenses &
Optical Instruments 1,274
1,114
527 439
409 376
- Asia/Pacific/Middle East/Africa
234 208
104 91
Equipment
46 52
Sunglasses &
Readers 95 71
TOTAL Third Quarter 1,415
1,237 Fourth Quarter
Lenses & Optical
Instruments 1,277
1,095
527 416
418 394
- Asia/Pacific/Middle East/Africa
231 197
101 88
Equipment
66 60
Sunglasses &
Readers 132 97
TOTAL Fourth Quarter 1,475
1,252
____________
1 Local acquisitions and partnerships.2 Net cash from operating
activities less purchases of property, plant and equipment and
intangible assets, according to the IFRS consolidated cash flow
statement.3 Net cash from operating activities before working
capital requirement
2014 CONSOLIDATED FINANCIAL
STATEMENTS
CONSOLIDATED
INCOME STATEMENT
€ millions, except per share data
2014
2013 Revenue 5,670 5,065 Cost of sales (2,355)
(2,227)
GROSS PROFIT
3,315 2,838 Research and development
costs (188) (164) Selling and distribution costs (1,367) (1,145)
Other operating expenses (717) (612)
CONTRIBUTION FROM OPERATIONS (*)
1,043 917 Other income from operations,
net 546 5 Other expenses from operations, net (367) (79)
OPERATING PROFIT
1,222 843 Cost of net debt (31) (8)
Other financial income 297 87 Other financial expenses (312) (99)
Share of profit of associates 3 22
PROFIT BEFORE TAX 1,179
845 Income tax expense (193) (199)
PROFIT FOR THE PERIOD 986
646 Attributable to equity holders of Essilor
International 929 593 Attributable to minority
interests 57 53 Basic earnings per share (€)
4.41 2.82 Weighted average number of shares (thousands) 210,511
210,156 Diluted earnings per share (€) 4.32 2.78 Diluted
weighted average number of shares (thousands) 214,820
213,057
(*) Revenue less cost of sales and operating expenses (research
and development costs, selling and distribution costs, other
operating expenses).
CONSOLIDATED
BALANCE SHEET (ASSET)
€ millions
December 31,
2014
December 31,
2013
Goodwill 4,668 2,476 Other intangible assets 1,532 732
Property, plant and equipment 1,154 998 Investments in associates 3
113 Non-current financial assets 103 97 Deferred tax assets 151 112
Long-term receivables 15 17 Other non-current assets 1 1
TOTAL NON-CURRENT ASSETS, NET 7,627
4,546 Inventories 1,002 869 Prepayments to suppliers
20 16 Short-term receivables 1,327 1,192 Current income tax assets
56 67 Other receivables 38 33 Derivative financial instruments 43
17 Prepaid expenses 50 46 Marketable securities - 5 Cash and cash
equivalents 626 786
CURRENT ASSETS
3,162 3,031 TOTAL ASSETS
10,789 7,577
CONSOLIDATED
BALANCE SHEET (EQUITY AND LIABILITIES)
€ millions
December 31,
2014
December 31,
2013
Share capital 39 39 Additional paid-in capital 360 302
Retained earnings 3,758 3,340 Treasury stock (286) (304)
Revaluation and other reserves (121) (83) Translation difference
236 (131) Profit attributable to equity holders of Essilor
International 929 593
EQUITY
ATTRIBUTABLE TO EQUITY HOLDERS OF ESSILOR INTERNATIONAL
4,915 3,756 Equity attributable
to non-controlling interests 345 285
TOTAL CONSOLIDATED
EQUITY 5,260 4,041
Provisions for pensions and other post-employment benefit
obligations 281 209 Long-term borrowings 1,521 607 Deferred tax
liabilities 383 165 Other non-current liabilities 394 517
NON-CURRENT LIABILITIES 2,579
1,498 Provisions 274 131 Short-term borrowings 926
567 Customer prepayments 31 28 Short-term payables 1,215 1,060
Taxes payable 58 63 Other current liabilities 421 156 Derivative
financial instruments 17 17 Deferred income 8 16
CURRENT
LIABILITIES 2,950 2,038
TOTAL EQUITY AND LIABILITIES 10,789
7,577
CONSOLIDATED CASH
FLOW STATEMENT
€ millions
2014
2013 NET PROFIT (a)
986 646 Share of profit of
associates, net of dividends received 25 42 Depreciation,
amortization and other non-cash items 451 247
Profit before non-cash items and
share of profit of associates, net of dividends received
1,462 935 Provision charges
(reversals) 99 (2) (Gains) losses on asset disposals, net (513) 1
Cash flow after income tax expense and finance costs, net
1,048 934 Finance costs,
net 31 8 Income tax expense (current and deferred taxes)
(a) 193 199
Cash flow before income tax
expense and finance costs, net
1,272 1,141 Income taxes paid (225) (222)
Interest (paid) and received, net (25) (7) Change in working
capital 10 (69)
NET CASH FROM OPERATING ACTIVITIES
1,032 843 Purchases of property,
plant and equipment and intangible assets (232) (297) Acquisitions
of subsidiaries, net of the cash acquired (1,836) (330) Purchases
of available-for-sale financial assets (4) (3) Change in other
non-financial assets (9) (5) Impact of changes in scope of
consolidation - 2 Proceeds from the sale of other non-current
assets 6 12
NET CASH USED IN INVESTING ACTIVITIES
(2,075) (621) Proceeds from the
issue of share capital
(b) 67 68 (Purchases) sales of
treasury stock, net
(b) (36) (169) Dividends paid to: -
Equity holders of Essilor International
(b) (198) (186) -
Minority shareholders of subsidiaries
(b) (30) (32) Proceeds
from bond issues 800 - Increase (decrease) in borrowings other than
finance lease liabilities 434 281 Purchases of marketable
securities (c) 6 - Repayment of finance lease liabilities (4) (1)
Other movements - 1
NET CASH USED IN FINANCING ACTIVITIES
1,039 (38) NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(4) 184 Cash and cash equivalents at
January 1st 749 580 Effect of changes in exchange rates
(147) (15)
NET CASH AND CASH EQUIVALENTS AT PERIOD-END
598 749 Cash and cash
equivalents reported in the balance sheet 626 786 Short-term bank
loans and overdrafts (28) (37)
(a) Please refer to the consolidated income statement (b) Please
refer to the statement of changes in equity (c) Money market funds
not qualified as cash equivalents under IAS 7
Investor Relations and Financial CommunicationsVéronique
GilletSébastien LeroyAriel BauerTel.: +33 (0)1 49 77 42
16orCorporate CommunicationsLucia DumasTel.: +33 (0)1 49 77
45 02orMedia RelationsMaïlis ThiercelinTel.: +33 (0)1 49 77
45 02
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