2017 results - essilor group · see slide 15. 2017 results 5 2017 key figures ... to be submitted...

2017 Results March 1st, 2018

2017 Results 2

Hubert Sagnières – Chairman and Chief Executive Officer

1. Introduction

2017 Results 3

Laurent Vacherot – President and Chief Operating Officer

2. 2017 Results

2017 Results 4

2017 Key Highlights

2. 2017 Results

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(1) generation supported de-leveraging

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 5

2017 Key Figures

2. 2017 Results

(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.

Growth2016

Revenue+5.3%

€7,115m €7,490m

Adjusted Contribution from operations(1)(2)

As a percentage of revenue

+3.5%

€1,321m

18.6%

€1,367m18.3%

Adjusted Earnings per share(2)+1.6%

€3.79 €3.85

Adjusted Free Cash Flow(3)+4.0%

€963m €1,002m

2017

Dividend per share(4)€1.50 €1.53

7,115

7,490

+5.3%

224

254

(103)

2016 Revenue Like-for-likegrowth

Bolt-onacquisitions (1)

Currency effect 2017 Revenue

+3.1%

+3.6%

-1.4%

2017 Results 6

2017 Revenue Up 6.7% Excluding the Currency Effect

€ millions

(1) Local acquisitions or partnerships.

+6.7%

2. 2017 Results

2017 Results 7

2017 Revenue by Division

2. 2017 Results

(1) Fast-growing countries include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America. All divisions combined.

Like-for-likeAt constant

exchange ratesReported

Lenses & Optical Instruments 6,498 6,218 +3.4% +5.8% +4.5%

Sunglasses & Readers 766 685 +0.1% +15.0% +12.0%

Equipment 226 212 +5.8% +7.8% +6.4%

TOTAL 7,490 7,115 +3.1% +6.7% +5.3%

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%

Change

Reported revenue in € millions 2017 2016 Lenses: solid momentum driven

by new products and e-

commerce

Continued build-up in

Sunglasses & Readers

Equipment and Instruments

performed well

Fast-Growing Markets(1):

24% of total sales

2017 Results 8

H2 2017 Like-for-like Revenue Growth: +3.8%

2. 2017 Results

Sharp acceleration in the US

Robust performance in China

Strong online sales

FGX, Costa and MJS driving

improvement in Sunglasses &

Readers

Like-for-like revenue growth 2017 H1 2017 H2 2017

Lenses & Optical Instruments +3.4% +2.7% +4.1%

North America +4.1% +2.7% +5.5%

Europe +2.4% +2.1% +2.7%

Asia/Pacific/Middle East/Africa +5.1% +5.0% +5.2%

Latin America -0.9% -1.5% -0.4%

Sunglasses & Readers +0.1% -1.5% +1.9%

Equipment +5.8% +11.7% +1.2%

TOTAL +3.1% +2.5% +3.8%

2017 Results 9

9 Acquisitions Representing ~€87m in Full-Year Revenue

2. 2017 Results

Europe

2

Latin America

2

Asia/Pacific/

Middle East/Africa

3

Sun Optical

Technologies Visolab

MangalsonsOpticas

Exclusivas

Optitrade

Logistics Center

Topcon Visioncare

Japan

North America

2

Partners In Vision

Vision Associates

CFE Optique

2 new countries:

Ethiopia, Guatemala

2017 Results 10

Reconciliation of Adjusted to Reported Accounts

2. 2017 Results

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).

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

of Essilor International833 (44) 789 813

Earnings per share 3.85 3.64 3.79

2016

Reported€ millions

2017

Adjusted

2017

Reported Items adjusted

2017 Results 11

Adjusted Contribution from Operations(1) (2) up 3.5%


(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.

Revenue 7,490 7,115 +5.3%

Gross profit 4,346 4,181 +3.9%

% of revenue 58.0% 58.8%

Operating expenses (2,979) (2,860) +4.2%

% of revenue 39.8% 40.2%

Contribution from operations (1) 1,367 1,321 +3.5%

% of revenue 18.3% 18.6%

€ millions Change2017

Adjusted(2)

2016

Reported

2. 2017 Results

E-commerce

Transitions sales

to other lens casters

Opex management

A

A

BB

18.6%18.5%

18.3%

+0.3%-0.4%

-0.2%

2016 Reported Operating Leverage Other 2017 Adjusted (2)before acquisitions

Acquisitions 2017 Adjusted (2)

2017 Results 12

Adjusted Contribution from Operations(1) (2)

at 18.3% of Revenue

Contribution from operations as a percentage of revenue

2. 2017 Results


(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.

Transitions sales

to other lens

casters

Brazil and India

Strengthening the

organization in

China and

e-commerce

activities

Operational

efficiencies

New products:

Varilux® X

series™,

Eyezen™

E-commerce

improvement in

developed

countries

Revenue 7,490 7,115 +5.3%

Contribution from operations(1) 1,367 1,321 +3.5%

Other income (expenses), net (119) (91) -

Operating profit 1,248 1,230 +1.5%

Financial income (expense), net (64) (66) -

Income tax (262) (285) -

Effective tax rate 22.1% 24.5% -

Net profit 922 880 +4.8%

Minority interests (89) (67) -

Profit attributable to equity holders 833 813 +2.5%

Earnings per share (in €) 3.85 3.79 +1.6%

Change€ millions2017

Adjusted(2)

2016

Reported

2017 Results 13

Adjusted Net Profit(2) Up 4.8%

2. 2017 Results

Share based payments

Litigations’ provisions

Transformation costs

Photosynthesis Group

Partners’ performances


(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.

A

C

A

C

B Advanced Pricing AgreementB

2017 Results 14

Capital Expenditure: Deploying Advanced Technologies to Support Long-term Growth

XX = Capital expenditure in € million (net of disposals) Capital expenditure as a percentage of revenue

2. 2017 Results

New photochromic lens

manufacturing lines

Modernization of regional

laboratories

4.6% 4.7%

5.6%

4.0%

4.8%

3.8% 3.8%

2%

3%

4%

5%

6%

7%

2011 2012 2013 2014 2015 2016 2017

192232

285

227

321

273 282

400

317

122

364

34

308

1,291

58

2017 Results 15

Adjusted(3) Free Cash Flow >€1bn

(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.

Operating cash flow

(excl. change in WCR)

Capital increase

Capital expenditure

Change in WCR

Dividends

Net financial investments

€ millions

+925

2. 2017 Results

Foreign exchange and others(2)

Reported change in net debt

1,793

2,089 2,062

1,661

2014 2015 2016 2017

Fast De-leveraging

Net debt in € millions

2017 Results 16

Proposed Dividend(a) per Share

172 177 185 198216

237

323 333

0.83 0.85 0.880.94

1.021.11

1.50 1.53

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.

2. 2017 Results

2017 Results 17

Paul du Saillant – Chief Operating Officer

Laurent Vacherot – President and Chief Operating Officer

3. Essilor in 2018

2017 Results 18

Successful New Product Launches in 2017…

3. Essilor in 2018

Innovation ChinaUSA FGM Online Myopia

North America

0

Europe

Asia/Pacific

Style

Colours

collection

H2

H2

H2

H1

H1

H1

Latin America

H1

2017 Results 19

…Delivering Promising Results

3. Essilor in 2018


Eyezen™ volume

doubled in 2017

Broadened product

range

Above sales target

~70% of Varilux®

series volumes

Trade up

Already 20% of Crizal®

volumes in the USA

Clear brand growth

driver

Eye Protect System™, the

fastest growth in the blue

filter lens category

Volume tripled in 2017

2017 Results 20

Ongoing Benefits of Innovations in 2018

3. Essilor in 2018


North America

NEW IN 2018

Style

Colours

collection

ONGOING BENEFIT

Latin America

NEW IN 2018

Europe

NEW IN 2018

ONGOING BENEFIT

Asia Pacific

NEW IN 2018

2017 Results 21

The “Ultimate Lens Package” Driving Strong Momentum in the US

3. Essilor in 2018


The Best in Vision, Clarity, and

Protection in a Single Lens

Progressive Lens Wearers[c.52 million people in the US]

Single Vision Lens Wearers [c.100 million people in the US]

Varilux®, Crizal® and Transitions® growing high single digit in Q4 2017

+ + + +

Source: Essilor - 2017 estimates

2017 Results 22

Continuing Strong Key Account Partnerships

3. Essilor in 2018


Category development

Supply chain offering

New partnerships formed

Faster growing retail groups

Interest from new players

2017 Results 23

Fast-Growing Markets(1) Will Continue to Drive Growth

3. Essilor in 2018

Latin AmericaAfrica-Middle East

(1) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America

Guatemala Acquisition of an integrated

prescription laboratory with

~50 optical stores

NEW

Asia-Pacific

Vietnam 100m inhabitants

New prescription laboratory

>100 accounts trained in 2017

88 Vision Ambassadors

Indonesia 260m inhabitants

Expansion to 35 cities

Mid-tier acceleration

1,500 Mitra Mata by end 2018

Ethiopia >100m inhabitants

Partnership with market leader

Joint approach by business

and mission

NEW

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)


2016 2017

2017 Results 24

E-Commerce Ready to Sustain High Growth

3. Essilor in 2018


En Route to €500m Revenue

€325m(1)

+47% vs. prior year(2)

Stronger Foundation for Future Growth

Key 2017 achievements:

Global organization fully established

Strong growth from mature markets

Increased our presence in FGM

Strategic giving programs

Key areas of focus for 2018 onwards

Accelerate in the eyeglass segment

Develop platforms for key Sun brands

Increased focus on proprietary contact lens

brands

Leveraging digital properties(1) Including Sunglasses & Readers online sales

(2) At constant exchange rates

€440m(1)

+39% vs. prior year(2)

+15% like-for-like growth

North

America

RoW

Europe

2017 Results 25

Delivering 30% Revenue Growth in China in 2017

3. Essilor in 2018


Lens Business

Double digit growth

Eyezen™

Kodak®/Partners

Creasky

Quality Wholesalers

2017 China Revenue Breakdown

Sunwear

Bolon™ streamlined supply

chain, strong brand equity

International deployment

Mujosh brand

Retail and Online

Double digit growth

MJS/Aojo deployment

Growing presence on leading

platforms

New retail

Over 1,200 stores 2018 Revenue

>€500m

800 million consumers in need of vision care; 4 people out of 10 are myopic

Unique leadership and management team

KEY ACCOUNT

ORGANIZATION

€5.8bnONLINE

ORGANIZATION

MONOBRAND

RETAIL

WHOLESALE

LENSES

Myopia

Management

Kids & Teens

Distribution of

specialized

products

MYOPIA SOLUTIONSAFFORDABLE

SUNWEAR & FASHION

2017 Results 26

A New Consumer-Driven Organization

3. Essilor in 2018


2.5 New Vision

Generation

Essilor Vision

Foundation

Last mile

distribution

INCLUSIVE

SOLUTIONS

2017 Results 27

Innovate in the Myopia Segment: A 5 Bn Wearer Opportunity

3. Essilor in 2018


Billion people(1)

2017 2030CAGR

1.8

2.73.2%

A Growing Pandemic Key Consumer Challenges

Poor aesthetics and physical comfort

Growing prevalence of myopia in children(2)

Risk of eye disease in high myopes(3)

Integrated approach including science, awareness, solutions and distribution

Global team reporting to COO

Dedicated business unit in China

A Dedicated Organization

2050CAGR

5.03.1%

(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 28

Further Progress towards our Core Ambition: Eradicating Poor Vision Within One Generation

3. Essilor in 2018

3.8

2017

If we do nothing Impact with $500M/yr

2.5

0

3.3

$5to improve the sight

of one person*

$500M/ yr

to eradicate poor vision

in 30+ years

# Uncorrected

in billion of people

2050 2100

Collective impact

(*) Low-income populations and people living below the international poverty line

2.93.8

2.0

2.6

2.5

3.3

0

2

4

6

8

10

12

2017 2050

No need for vision correction

Corrected

Uncorrected

in billions of people

2017 Results 29

Accelerating in 2018

Awareness Inclusive Business Strategic Giving

More than 5,700 primary

vision care providers trained

in ten countries at the end of

2017

New countries: Bangladesh,

Liberia, Indonesia

Private Public Partnerships

Product Innovation

Essilor Social Impact Fund

More than 3,000 Essilor

employees volunteered

globally

3. Essilor in 2018

€19 million new contribution

2017 Results 30

Essilor in 2018 at a Glance

3. Essilor in 2018

Deployment of robust innovation pipeline

Strong potential in the US and China

Improvement in Brazil and India

Lenses business

Xiamen Yarui Optical (Bolon™) expected to be back to growth

Expansion of MJS and Aojo footprint

Sunglasses

& Readers

Targeting acceleration from acquisitions & partnerships in H2

Tax rate similar to 2017 level

Continued deleveraging

Group-wide

Sustained momentum in developed countries

Continue to invest in fast-growing marketsE-commerce

2017 Results 31

Outlook for 2018

3. Essilor in 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).

Like-for-like Revenue Growth

Contribution from operations(1)

as a percentage of revenue

Finalization of the Essilor and Luxottica proposed combination planned for the first

part of 2018

≥ 18.3%(2)

Around 4%

Questions & Answers

2017 Results 33

4. Appendices

2017 Results 34

Reported P&L Statement

4. Appendices

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

of Essilor International 789 813 -3.0%

% of revenue 10.5% 11.4%

Earnings per share (in €) 3.64 3.79 -4.0%

€ millions 2017 Change2016


2017 results - essilor group · see slide 15. 2017 results 5 2017 key figures ... to be submitted...

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