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
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
TODAY AGENDA
• An Attractive Eyewear Industry
• What Safilo stands for
• Safilo in context
• Key Strategies
• Financial Targets
2
TODAY AGENDA
• An Attractive Eyewear Industry
• What Safilo stands for
• Safilo in context
• Key Strategies
• Financial Targets
3
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
TODAY AGENDA
• An Attractive Eyewear Industry
• What Safilo stands for
• Safilo in context
• Key Strategies
• Financial Targets
5
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
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
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
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
10SAFILO 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 11SAFILO 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 12SAFILO 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 13TODAY AGENDA
1 – An Attractive Eyewear Industry
2 – What Safilo stands for
3 – Safilo in context
4 – Key Strategies
5 – Financial Targets
14KEY 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
15KEY 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
16TODAY AGENDA
• An Attractive Eyewear Industry
• What Safilo stands for
• Safilo in context
• Key Strategies
• Reignite Sales Growth
• Financial Targets
17REIGNITE 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
18REIGNITE 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 EuropeREIGNITE 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) 20REIGNITE 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,)
22REIGNITE 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
23TODAY AGENDA
• An Attractive Eyewear Industry
• What Safilo stands for
• Safilo in context
• Key Strategies
• Reignite Sales Growth
• Reduce Cost Structure
• Financial Targets
24REDUCE 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
25REDUCE 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
26REDUCE 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
27TODAY AGENDA
• An Attractive Eyewear Industry
• What Safilo stands for
• Safilo in context
• Key Strategies
• Financial Targets
28FINANCIAL 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
29REFINANCING
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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