2014 - Essilor
2014 Results February 19, 2015 Agenda Introduction 2014 Results Strategy Online Business Sun Business Outlook 2014 Results 2 Improving Lives by Improving Sight 2014: A Year of Strong Growth 2013 €5,065m Revenue Growth +13.4%(6) +2pts 37% Volume share(1) Adjusted contribution from operations (2) As a percentage of revenue Adjusted earnings per share (2) Free cash flow(4) Dividend per share(5) (3) €920m +15.0% 2014 €5,670m 39% €1,057m 18.6% 18.2% €2.87 +6.3% €3.05 €546m +47% €800m €0.94 +8.5% €1.02 (1) Volume share for Lenses and Optical Instruments (2) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen Yarui Optical) (3) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment (4) Free cash flow = Net cash from operating activities less change in WCR and net capital expenditure (5) To be submitted to shareholder approval at the May 5, 2015 Annual General Meeting (6) Growth at constant exchange rates 2014 Results 4 North America and Fast-Growing Markets Leading the Way in Lenses North America up 8% : Strong momentum driven by innovation and brands (1) FGM in Asia/M.-East/Afr. up 14% : Strong demand for better vision, China, India (2) (1) Latin America up 15% : Innovation and mid-tier fueling growth (1) (1) 2014 combined revenue growth: like-for-like and bolt-on acquisitions (2) Fast-Growing Markets: ASEAN, China, Hong Kong, India, South Korea, Taiwan, the Middle East and Africa 2014 Results 5 Sun and Online above Expectations Bolon: Strong growth model based on branding and distribution Costa: Successful positioning and distribution model Online: Solid demand for affordable single vision eyeglasses 2014 Results 6 A Dynamic Year for Acquisitions and Partnerships 9.7% revenue growth driven by the successful execution of M&A strategies (1) 10 new countries for Essilor in 2014 Successful integration plans (1) 2014 revenue growth driven by bolt-on and strategic acquisitions 2014 Results 7 Efficient Cost Management, Operations and Supply Chains 495 million lenses (1) produced in 33 plants 140 million pairs of readers and sunglasses Synergies from acquisitions successfully executed (1) Including 30 million non-prescription sun lenses 2014 Results 8 A Strong Global Organization to Improve and Protect the Vision of 7.2 Billion People in the World Europe North America (1) 815 million people (2) 12,100 employees Paris (1) 360 million people (2) 13,500 employees Vancouver Moscow Baar Tokyo Rhode Island Dallas Casablanca Dubai Bangalore Shanghai Bangkok Mexico Nairobi Bogota Abidjan Singapore Rio de Janeiro Johannesburg Asia/Pacific (1) Africa/Middle East (1) 1.3 billion people (2) 2,400 employees (1) Source: Worldbank (2) Essilor employees as of December 31, 2014 4.1 billion people (2) 24,000 employees Sydney Latin America (1) 615 million people (2) 6,000 employees Essilor headquarters Regional hubs 2014 Results 9 58,000 People Focused on a Powerful Mission Improving and Protecting the Vision of 7.2 Billion People in the World Members of Essilor’s Executive Committee 2014 Results 10 Agenda Introduction 2014 Results Strategy Online Business Sun Business Outlook 2014 Results 11 Full-Year 2014 Performance vs. Guidance FY 2014 February 2014 Guidance Revenue Growth: Like-for-like 3.7% 2.5% to 4% Like-for-like + Bolt-on acquisitions 8.6% 7% to 9% Total revenue growth 13.4% 10% to 12% Adjusted contribution from operations 18.6% (1) (excluding currency effect) as a percentage of revenue (1) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen Yarui Optical). Bolt-on acquisitions = Local acquisitions and partnerships Contribution from operations = Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment. 2014 Results 12 Fourth-Quarter Revenue Up 17.8% Like-for-like growth: 5% Share gains in a healthy US market Greater momentum in all fast-growing markets Rebound of Sunglasses & Readers driven by Bolon Strong contribution from acquisitions Strategic acquisitions: 6.2% positive impact Bolt-on acquisitions(1): 2.8% positive impact Favorable currency impact of 3.9% (1) Bolt-on acquisitions = Local acquisitions or partnerships 2014 Results 13 Adjusted P&L: Contribution from Operations up 15% (1) (2) 2013 2014 (1) Adjusted(1) % Change Revenue 5,065 5,670 +12.0% Gross profit 2,841 3,328 +17.1% % of revenue 56.1% EBITDA 1,173 1,365 % of revenue 23.2% 24.1% 920 1,057 In € millions Contribution from operations(2) % of revenue Adjusted 18.2% 58.7% +16.4% +15.0% 18.6% (1) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen Yarui Optical), except for revenue (2) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment. 2014 Results 14 Revenue up 13.4% Excluding Currency Effect Currency impact positive at year-end: +3.9% in Q4 2014 In € millions (73) 244 247 187 -1.4% +4.8% +4.9% 5,670 +3.7% +12.0% +8.6% 5,065 +13.4% 2013 Revenue Like-for-like growth Bolt-on acquisitions (1) Strategic acquisitions (2) Currency effect 2014 Revenue (1) Local acquisitions and partnerships, including Xiamen Yarui Optical and Costa. (2) Transitions Optical and Coastal.com. 2014 Results 15 2014 Revenue by Region and Division % Change 2013 2014 % Change (reported) (like-for like and bolt-on acquisitions(1) combined) 4,505 4,970 +10.3% +6.5% North America 1,770 2,038 +15.1% +7.8% Europe 1,572 1,653 +5.2% +0.9% Asia/Pacific/Middle East/Africa 812 898 +10.6% +10.7% Reported revenue in € millions Lenses and Optical Instruments Latin America 351 381 +8.6% +15.1% Sunglasses & Readers 355 503 +41.7% +41.9% Equipment 205 197 -3.7% -3.0% 5,065 5,670 +12.0% +8.6% TOTAL Fast-Growing (2) Markets : +13.6% Developed Markets: +2.7% (1) Local acquisitions and partnerships. (2) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa and the Middle East. 2014 Results 16 Business Review by Division Lenses and Optical Instruments +6.5% combined growth (1) Like-for-like revenue growth Sunglasses & Readers +41.9% combined growth (1) Like-for-like revenue growth Equipment -3.0% combined growth (1) Like-for-like revenue growth +5.1% +3.6% H1 2014 H2 2014 Success of new products and key brands Consumer advertising Stronger positioning in photochromics thanks to Transitions Online business fueled by Coastal.com -1.4% -0.5% -3,0% -0.8% H1 2014 H2 2014 H1 2014 H2 2014 Strengthening of sunwear portfolio led by successful integration of acquisition Sharp rebound in Q4 (6.7% likefor-like) driven by Bolon® Major inventory rundown impact for FGX in the US Fast growth in Europe and in Latin America Sharp rebound in Q4 (7.2% likefor-like) led by the adoption of a new lens blocking technology Pause in order intake for digital surfacing machines Negative mechanical impact of Group acquisitions on division’s out-of-group revenue (1) 2014 revenue growth: like-for-like and bolt-on acquisitions combined 2014 Results 17 Lenses and Optical Instruments by Region North America +7.8% combined growth (1) Like-for-like revenue growth Europe +0.9% combined growth Asia/Pacific/M.-East/Afr. +10.7% (1) Like-for-like revenue growth combined growth +15.1% (1) combined growth Like-for-like revenue growth +13.5% +4.1% H1 2014 +7.9% H2 2014 +3.0% H2 2014 Consumer advertising Strong growth for Crizal & Xperio Gains in contact lenses Success in managed care and chains Good momentum in Canada Strong performance of EyeBuyDirect and FramesDirect -0.5% +0.6% Strong momentum in the UK and Southern Europe thanks to key accounts Negative impact of a contract loss in Central and Northern Europe Good underlying business with ECPs supported by product innovation and consumer branding (1) Like-for-like revenue growth +10.5% +10.3% +5.9% H1 2014 Latin America H1 H2 FGM (2) H1 +1.3% H2 H1 2014 H2 2014 DM India, China, Middle-East: double digit growth Steady rise in sales of Crizal, Varilux and Nikon lenses Strong growth in Australia Overall performance impacted by challenging conditions in Japan in H2 Sustained development of major brands in Brazil supported by media push Launch of Kodak in Brazil and Nikon in Columbia Success with large accounts (1) 2014 revenue growth: like-for-like and bolt-on acquisitions combined (2) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa and the Middle East. 2014 Results 18 On Track to Achieve our €2.8bn Revenue Ambition by 2018 in Fast-Growing Markets (1) 2014 Revenue up 21.1% at €1,261m 22.2% of Group revenue Russia +41% China +50% Africa-Middle East +17% India +20% South East Asia +11% Latin America +17% (1) Fast-growing markets include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia and Latin America Revenue growth: like-for-like and bolt-on acquisitions combined, including: Lenses and Optical Instruments, Equipment and Sunglasses & Readers. 2014 Results 19 Strategic Acquisitions and New Partnerships Representing €525m in Full-Year Revenue (1) 2 Strategic Acquisitions 10 Bolt-on Acquisitions €360m Sales to third parties: €151m since acquisition (April 1) Major product launches in 2014: Transitions Signature Graphite Green €165m Europe 3 North America 3 Asia/Middle East/Africa 3 Latin America 1 Sales: €93m since acquisition (May 1) (1) Local acquisitions and partnerships. 2014 Results 20 Adjusted Contribution from Operations at its Highest Level (1) (2) Contribution from operations as a percentage of revenue -20 bps -50 bps +100 bps +70 bps -60 bps -20 bps +30 bps +10 bps 18.6% 18.6% 18.5% 18.2% 2013 Adjusted Transitions Optical without synergies Coastal.com Bolt-on acquisitions(3) 2014 before operating leverage, synergies and investment in media Operating leverage and synergies from Transitions Optical Incremental media spend 2014 Adjusted (1) Adjusted in 2014 for €15m, of which €13m step-up on inventories stemming from major acquisitions (Transitions Optical, Costa and Xiamen Yarui Optical) Adjusted in 2013 for €3m step-up on inventories from the acquisition of Xiamen Yarui Optical. (2) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment. (3) Local acquisitions and partnerships, including Xiamen Yarui Optical and Costa. 2014 Results 21 Adjusted Contribution from Operations before PPA and Bolt-on Acquisition Costs: 19.8% (1) (2) In € millions 2012 2013 2014 Revenue 4,989 5,065 5,670 893 920 1,057 PPA (27) (30) (64) Bolt-on acquisition costs (6) (8) (4) -70 bps -70 bps -120 bps (12) (14) (24) (1) Adjusted contribution from (2) operations (1) Impact on adjusted contribution (2) from operations Full EPS impact (in cents) (1) Adjusted for non-recurring items resulting mainly from major acquisitions (2) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expense and goodwill impairment 2014 Results 22 EPS Up 9.4% Excluding Currency and Coastal.com 2013 Adjusted(1) 2014 Adjusted(1) Contribution from operations(2) 920 1,057 Other income (expenses), net (63) (68) Operating profit 857 989 Financial income (expense), net (20) (44) Income tax (202) (246) Effective tax rate 24.1% 26.0% Net profit 657 702 Minority interests (54) (60) Profit attributable to equity holders 603 642 Earnings per share (in €) 2.87 3.05 In € millions (1) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen Yarui Optical), except for revenue. (2) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment. Strategic acquisitions financing Geographic mix Withholding tax Increase mainly stemming from Xiamen Yarui Optical integration €3.14 Excl. currency & Coastal.com 2014 Results 23 Capital Expenditure: Continuing to Invest in Long-term Growth 9% 8% Production capacity: Brazil, Laos Headquarters in Asia (Singapore) and in Brazil (Rio) FGX Rhode Island distribution center H2 capital expenditure to sales: 4.4% 7% 183 285 6% 5% 192 5.9% 232 5.6% 227 116 4% 124 4.7% 4.6% 4.0% 3% 3.5% 2% 3.2% 1% 0% 2008 2009 Capital expenditure (net of disposals) 2010 2011 2012 As a percentage of revenue 2013 2014 XX in € millions 2014 Results 24 Free Cash Flow Up 47% (1) In € millions Operating cash flow (excl. change in WCR) Change in WCR (2) 1,022 232 Capital expenditure 228 Dividends 36 +800 10 1,851 Reported change in net debt Capital increase Share buybacks Net financial investments 1,424 67 176 Other (3) (1) Free cash flow = net cash from operating activities less change in WCR and capital expenditure (2) Improvement reflects €56m in non-recurring items (3) Other items include the positive €167-million currency effect. 2014 Results 25 Net Debt: 1.3x Adjusted EBITDA at Dec. 31, 2014 (1) In € millions 2,166 1,793 Financing key acquisitions: Transitions Optical: USD 1.73bn Coastal.com: CAD 430m Costa: USD 270m 369 237 2012 2013 H1 2014 2014 (1) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen Yarui Optical). 2014 Results 26 Dividend per Share: up 8.5% to €1.02* 1.02 0.94 0.83 0.85 0.88 0.70 0.62 0.66 215 129 2007 137 2008 172 177 2010 2011 185 198 147 2009 2012 2013 2014* * To be submitted for shareholder approval at the May 5, 2015 Annual General Meeting 2014 Results 27 2015 at a Glance Revenue Launch of new products: Eyezen, new Varilux range, Transitions, etc. Financials Contribution from operations: Benefits of media spend ramping up throughout the year - Strong lift from Transitions in H1 Momentum in Fast-Growing Markets - Efficiency programs Potential slowdown in Transitions’ third-party sales Lift from Bolon, Costa and expected rebound at FGX in the US Strong development of online platforms Bolt-on acquisitions pipeline Strong lift from currencies: c.+9% at end of January 2015 rates - Innovation/New products - Bolt-on dilution skewed towards H2 Net debt impacted by the full-year consolidation of Transitions Optical and Coastal Tax rate at c.26% Capital expenditure between 4% and 5% of revenue 2014 Results 28 Agenda Introduction 2014 Results Strategy Online Business Sun Business Outlook 2014 Results 29 A Strategy Delivering Sustainable Long-term Performance Logarithmic scale 100000 (1) Market Capitalization CAGR +17% 10000 (1) Revenue CAGR 1000 (1) Net Profit CAGR +11% +13% (2) 100 10 1 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2014 One of the best Total Shareholder Returns of the CAC 40 and Euro Stoxx 50 over 40 years (3) (4) (1) (2) (3) (4) (1) CAGR : 18.6% 1975-2014 CAGR Net profit adjusted in 2013 and 2014 for non-recurring items resulting mainly from major acquisitions (Transitions Optical, Coastal.com, Costa and Xiamen Yarui Optical) Total Shareholder Return: share price appreciation + reinvested dividends Source: Nasdaq Corporate Solutions via Thomson ONE IR / Period: October 28, 1975 (Essilor IPO) to January 31, 2015 2014 Results 30 A Unique Combination Driving for Success A powerful mission Poor vision is the biggest handicap in the world A clear strategy Innovation & partnerships Strong teams Entrepreneurial & global Employees aligned with shareholders through employee shareholder program and Valoptec governance 2014 Results 31 2015-2018: Fulfilling our Mission on a Bigger Playing Field… 2008-2013 2013-2018 PRESCRIPTION LENSES Manufacturers, Distributors & Laboratories <€11.0bn 3-4% FASTGROWING MARKETS 10-12% PRESCRIPTION LENSES SUNGLASSES ONLINE €12.7bn €8.5bn €5.8bn 3-4% 6-7% 14% €27.0bn 6-7% Superior Products & Innovative Services Operational Efficiency 2014 Results 32 ... With Strong and Growing Demand for Better Vision… 4.5bn people in need of vision correction / +2% (1) 1.9bn people wearing eyeglasses / +3% (1) 1.7bn myopes 2.1bn presbyopes +3% +2.5% (1) (1) 1.4bn Only people wearing sunglasses 260m cataracts +3.6% 120m AMDs +2.6% (1) (2) (1) (1) CAGR (2) Age-related Macular Degeneration Source: Essilor - 2015 estimates 2014 Results 33 ... A Powerful Ambition for 2018… PRESCRIPTION LENSES FAST Revenue: GROWING €2.8bn MARKETS >5% like for like revenue growth SUNGLASSES ONLINE Revenue: €1.1bn Revenue: €400-500m Contribution from operations(1): in the high teens Contribution from operations(1): 10-12% Total revenue: €8.2bn Like-for-like revenue growth >6% EBITDA ~€2bn Free cash flow(2) ~€1bn (1) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment / as a % of revenue (2) Free cash flow = Net cash from operating activities less change in WCR and net capital expenditure 2014 Results 34 … And an Effective Action Plan to Deliver Value Across Every Business PRESCRIPTION LENSES Accelerate FAST New Products GROWING New Countries MARKETS Partnerships SUNGLASSES ONLINE Performance & Mid-tier Grow fast in a profitable channel Innovation Consumer marketing push Performance sunwear Coastal turnaround Prescription solutions Consumer marketing Leveraging Transitions Consumer marketing Online solutions for retailers Acquisitions and partnerships delivering growth and synergies 2014 Results 35 Bigger Playing Field: Faster Growth, Higher Dollar & Fast-Growing Market Exposures Europe +5%(1) 30% North America +16%(1) 2014 Revenue: 45% €5,670m Asia/Pacific/ Middle East/Africa +22%(1) 18% 7% Latin America +17%(1) (1) 2014 Revenue growth excluding currency effect 2014 Results 36 A Pure Player in Optics Leveraging Business Interconnections to Boost Value Creation ONLINE PRESCRIPTION LENSES One consumer One playing field SUNGLASSES 2014 Results 37 Our Focus in 2015/2016 Mission / Awareness Fast-Growing Markets Innovation Interconnected Business Model for Accelerated Value Creation Online Consumer Marketing Sun 2014 Results 38 Innovation: Essilor’s Core Growth Driver Mission / Awareness FastGrowing Markets Interconnected Business Model Online Strategic objectives Business interconnections Innovation Consumer Marketing Sun Value creation Breakdown of R&D expenses in the optical industry Other Industry Players c.25% Affordable innovations to Fast-Growing Markets c.75% Essilor Source: Essilor Pricing power Stretch Essilor’s lead Know-how transfers to sunglasses Improving consumer experience in online shopping Revenue: + Contribution from operations: ++ Free cash flow: + Contribution from operations = Operating profit before compensation costs of share-based payments, restructuring costs, other income & expenses and goodwill impairment Free cash flow = Net cash from operating activities less change in WCR and net capital expenditure 2014 Results 39 Mission / Awareness Introducing FastGrowing Markets Innovation Interconnected Business Model Online Consumer Marketing Sun A complete range of new digital lenses designed for a connected life An exclusive power distribution technology A unique light filtering technology (1) Relaxing eyes today while protecting vision health tomorrow (1) Pending patents 2014 Results 40 Healthy Portfolio of New Products in 2015 Mission / Awareness FastGrowing Markets Innovation Interconnected Business Model Online Consumer Marketing Sun New New 2014 Results 43 Consumer Marketing Raising Awareness and Revenue Growth Mission / Awareness FastGrowing Markets Interconnected Business Model Online Strategic objectives Business interconnections Innovation Consumer Marketing Sun Value creation Getting closer to the consumer in every business: €193m to be invested in 2015 Sun 26 Fuel like-for-like revenue growth Pricing power Develop brand awareness and loyalty Category development Revenue: ++ Online 48 119 Prescription brands Contribution from operations: =/+ Free cash flow: = 2014 Results 45 Leveraging Group Capabilities Towards Superior Sunwear Offerings Mission / Awareness FastGrowing Markets Interconnected Business Model Online Strategic objectives Business interconnections Innovation Consumer Marketing Sun Value creation Prescription Sun Online Bolon sales Innovate beyond fashion: boost lens performance Acquire and develop strong regional brands Multiple price points & channel expertise Innovation: E-SPF 50 Synergies with Transitions (Xperio React, Snow goggles for Dragon Alliance Eyewear, Safe Riders in India, etc.) Revenue: + Contribution from operations: =/+ Free cash flow: + 2014 Results 46 Online Solutions Pushing Overall Demand for Optical Products Mission / Awareness FastGrowing Markets Interconnected Business Model Online Strategic objectives Business interconnections Innovation Consumer Marketing Sun Value creation Online demand: prescription, frames, sunglasses, contact lenses Education and information Worldwide accessibility Accelerate category penetration Segment the industry Offerings for eye-care professionals Supply chains Revenue: +++ Contribution from operations: + Free cash flow: ++ 2014 Results 47 New Products, Business Model and Geographies in Fast Growing Markets Mission / Awareness FastGrowing Markets Innovation Interconnected Business Model Online Strategic objectives Business interconnections Consumer Marketing Sun Value creation Kodak and Nikon in Brazil Revenue to more than double from €1.3bn to €2.8bn by 2018 New territories Accelerate like-for-like growth by leveraging all businesses Bolon in China Sun & Readers as door openers Online sales in Asia and Latin America Revenue: +++ Contribution from operations: =/+ Free cash flow: =/+ 2014 Results 48 China: A Compelling Example of How to Leverage All our Businesses Mission / Awareness FastGrowing Markets Innovation Interconnected Business Model Online Consumer Marketing Sun SUNGLASSES PRESCRIPTION LENSES Highly underpenetrated sunwear industry Representing over 20% of global volumes and growing at 10% p.a. Innovation for 800m myopes Biggest senior segment with 5% growth p.a. Vision under-developed in Tier 3-4-5 cities Chinese consumer driven by social media Strong partnership networks Ensuring strong growth for Bolon in all geographies, especially in Tier 1 cities Expansion in duty free Reinforcing Essilor sunwear portfolio with Prosun acquisition ONLINE World’s largest e-commerce industry Essilor doubling online sunwear sales in 2014 Our Next Billion Sales Country Revenue Growth >20% / Contribution from operations >20% of revenue Source: Essilor, Official China census statistics 2014 Results 49 Corporate Mission: Improving Awareness of the World’s Leading Handicap Mission / Awareness FastGrowing Markets Innovation Interconnected Business Model Online Consumer Marketing Sun Inclusive Business, Advocacy and Community Impact New wearers as a result of Corporate Mission initiatives o 500,000 so far o More than 1 million targeted in 2015 o New initiatives in China, Mexico, etc. Driving global awareness o Essilor Vision Foundation expansion: 300,000 people screened in 2014 o Vision Impact Institute launched in China €30m ‘Vision for Life’ strategic giving program 2014 Results 50 Corporate Mission: Developing Business Models to Unlock Last-mile Distribution Mission / Awareness FastGrowing Markets Interconnected Business Model Online Targeting the New Vision Generation of 2.5 billion people Innovation Consumer Marketing Sun Optical retail stores per 100,000 inhabitants 15.2 7.6 3.4 1.8 350 EyeMitra points of sale so far 10,000 EyeMitra professionals to be trained by 2020 Africa Middle East Asia Latin America North America Public-Private partnerships in place 2014 Results 51 Improving Lives by Improving Sight Agenda Introduction 2014 Results Strategy Online Business Sun Business Outlook 2014 Results 53 The Online Optical Industry is on a Fast Track… Global online optical retail* (in € billions) As a percentage of the total optical retail industry +14% 2013-2018e CAGR +13% 5.8 10-15% 2008-2013 CAGR 1.6 1.7 2.0 2.4 2.7 3.0 6% c.4% c.2% 2008 2009 2010 2011 2012 2013 2018e 2025e * Includes online pure players and click & mortars / for spectacles, contact lenses and sunglasses Source: Estin & Co 2013 estimates and analysis; Essilor International 2014 Results 54 … At the Dawn of a Sharp Acceleration Close to the point where other consumer sectors have tipped Global online optical potential is high E-commerce share by category over time (%) Online optical retail* as a percentage of total optical retail industry (in value) 25 20 c.5% 2025 North America 10-15% (2014) 2014 >4% 11–23% 15 10 5 0–3% China (2014) Tipping points close to 5% c.8% * Includes online pure players and click & mortars / for spectacles, contact lenses and sunglasses. Source: Estin & Co 2014 estimates and analysis; Essilor International 0 2000 2002 2004 2006 2008 2010 2012 Footwear Sporting goods Small appliances Toys Flowers Office products Auto parts Tipping point Source: Forrester data; Press search; BCG analysis 2014 Results 55 Compelling Online Growth Levers Focusing on fast-growing myope consumer segment Reaching consumers faster in emerging markets Complementing distribution through our customers’ stores Convenience leading to higher volume, enhancing value 2014 Results 56 Online Distribution Fostering Volume and Value Growth Volume Value Equipment per consumer per year $ per consumer per year Base 100 = Market Average* Base average Base100 100 == Market Market Average 275 420 300 139 100 100 Market Average Market Average US market : Frames + single vision lenses * Market average = 0.5 items of equipment per consumer per year 2014 Results 57 Key Essilor Assets to Differentiate itself in Online Distribution The best global supply chain for lenses, frames and contact lenses Widest assortment of lenses, sunglasses and optical frames Essilor brands Customer relationships for digital/physical convergence Cumulative experience and scale effect of the online optical leader Global and local optical consumer insights 2014 Results 58 Buoyant Results Recorded by our Long-Standing Websites in 2014… 2014 sales growth(1) : 31% 2014 Contribution from operations(2) up 65% (3) (1) EyeBuyDirect and FramesDirect combined (2) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment. (3) EyeBuyDirect and FramesDirect combined / Before Purchase Price Allocation 2014 Results 59 … Driven by Efficient Marketing Initiatives and Technology Advances October’s “Buy One Get One” Promotion Responsive design implemented in February 2014 Sales conversion on mobile devices surged 80% Biggest month of the year for EyeBuyDirect: +20% of site visitors vs. previous month 2014 Results 60 Capturing Online Potential in China Sunwear Own sites and own stores on major Chinese B2C platforms (Tmall, JD, Jumei, etc.) Year-round buzzes and promotions in online stores and social network platforms Internet sales doubled to 10% of our Chinese sunwear sales in 2014 2014 Results 61 Accelerate Coastal Growth and Gain Market Share Supply Chain Optical lab in China for global supply Essilor laboratory in Thailand for European supply Essilor distribution center in the US for contact lenses distribution In-group sourcing Marketing Data driven reallocation of marketing activities Business development Dedicated team for Chinese expansion Multi-country expansion Contact Lenses reorder application Opportunistic bolt-on acquisitions Responsive user experience website Launch service solution for Eye Care Professionals Transitions, Kodak and Polaroid branded lenses Unprofitable store divestitures 2014 Results 62 A Clear Action Plan to Achieve our Ambition by 2018 2018 2015 2014 Online revenue: €400-500m Contribution from operations : 10-12% (1) Leverage scale and supply chain Consumer marketing Online solutions for customers International expansion Robust growth and positive contribution from operations Coastal turnaround / Synergy programs Strong team in place, foundation for growth Losses narrowed (1) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment / as a % of revenue. 2014 Results 63 Agenda Introduction 2014 Results Strategy Online Business Sun Business Outlook 2014 Results 64 2014 Results 65 Sharp Revenue Growth in 2014: up 33%* Estimated* revenue in € millions Sunlenses (prescription & plano) +6%* Strong like-for-like growth in polarized prescription lenses o Media consumer driving Xperio’s growth 2014 Polycore integration c.690 +79% Sunglasses Bolon >20% like-for-like growth 2013 Costa >15% like-for-like growth c.520 FGX o USA: drugstore inventory drawdown o Rest of the world >10% like-for-like growth Rebalancing our sunwear portfolio towards faster growth segments: USA Premium market China * Prescription sunlens revenues are estimates based on extrapolated data from laboratory reporting systems Revenue growth include acquisitions 2014 Results 66 2014: Successful Integration of our Acquisitions In-sourcing of prescription design and coatings Expansion in North East of the USA (H2 2014) In-sourcing of sunlenses Portfolio reinforcement with Prosun Launch of a prescription program, effective in H1 2015 Strengthening of our manufacturing capabilities Widening our plano sunlenses’ range 2014 Results 67 2014: Reinforcing our Ability to Set New Sunlens Quality Standards Plano sunlens innovation Prescription sunlens innovation Xperio Gradient Polaroid range Online education New mirror technologies by Satisloh Improved anti-scratch process Comprehensive material offer: CR39 Polycarbonate Trivex “Made in Italy” 2014 Results 68 Continuing to Grow our Sunwear Business in 2015 Acquisitions & partnerships Luxury fashion Performance Innovation Entry/mid-tier Sunwear Geographic & channel expansion Brand equity 2014 Results 69 Innovation to Remain the Core Growth Driver Innovation Improving lens performance Brand equity New iconic styles Expansion Acquisitions Creative promotions & POS innovation to boost purchases 2014 Results 70 From a Very Basic Sunlens… FRONT SURFACE SCRATCH-RESISTANCE 4 LAYERS TINT SCRATCH-RESISTANCE LENS BACK SURFACE 2014 Results 71 …to a More Advanced Solution… FRONT SURFACE SCRATCH-RESISTANCE 6 LAYERS SMUDGE REPELLENCE SMUDGE REPELLENCE TINT SCRATCH-RESISTANCE LENS BACK SURFACE 2014 Results 72 …and on to the Ultimate Essilor Sunlens Technology FRONT SURFACE UP TO 25 LAYERS SCRATCH-RESISTANCE AR EFFICIENCY (E-SPF protection included) DUST REPELLENCE SMUDGE & WATER REPELLENCE OR FOG REPELLENCE SMUDGE & WATER REPELLENCE OR FOG REPELLENCE MIROR DUST REPELLENCE AR EFFICIENCY (harmful BLUE-VIOLET LIGHT protection included) TINT OR POLARIZING FILTER SCRATCH-RESISTANCE HIGH INDEX LENS BACK SURFACE 2014 Results 73 Prosun, a New Brand to Reinforce our Chinese Leadership Innovation A vibrant brand with strong awareness Brand equity A unique kids offering Expansion Acquisitions Strengthening our male sunwear range 60% brand awareness in China FengShaoFeng, Movie & TV actor 2014 Results 74 Reinforcing the Equity of our Core Brands Innovation New ambassador… Kenny Chesney, Country singer … & university partnership Brand equity Expansion Creating Foster Grant Signature for trade-up Acquisitions Leveraging celebrities and PR Sonakshi Sinha, Top Bollywood actress HuangXiaoMing, Movie & TV actor YangMi, Movie & TV actress 2014 Results 75 : an Iconic Brand Innovation Brand equity Expansion Acquisitions 2014 Results 76 Sophie Marceau, New Ambassador for Innovation Brand equity Expansion Acquisitions 2014 Results 77 Geographic and Channel Expansion Innovation Travel retail Brand equity Expansion Leveraging on-line distribution Acquisitions Operations in new territories DFS store in Asia Relay store in an airport in the Czech Republic 2014 Results 78 Acquisitions and Partnerships to Increase Growth Innovation Brand equity Expansion Commercial Partnerships New Acquisitions Retail sell-out price Acquisitions Retail sell-out price Luxury fashion c. 12m units Performance Luxury fashion 25-30m units c. 12m units Performance 25-30m units …. Entry/mid-tier Entry/mid-tier >500m units >500m units “INFORMAL TRADE” “INFORMAL TRADE” Functional use Reinforcing our brand portfolio Strengthening our geographic coverage Asia Latin America Europe Functional use Serving the luxury, fashion and performance segments with: Prescription Technology Supply chain Joint-development Turnkey solutions concept 2014 Results 79 A Strong €1.1bn Sun Business by 2018 Estimated* revenue in € millions 2018 1,100 2015 >760 2014 Like-for-like revenue growth: c.7% 2013 c.520 c.690 Total revenue growth with acquisitions: >10% Contribution from operations : in the high teens (1) * Prescription sunlens revenues are estimates based on extrapolated data from laboratory reporting systems (1) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment / as a % of revenue. 2014 Results 80 Agenda Introduction 2014 Results Strategy Online Business Sun Business Outlook 2014 Results 81 Outlook for 2015 Revenue Growth: Like-for-like Excluding currency effect 8% to 11% (3) Adjusted contribution from operations (1) > 4.5% (2) ≥ 18.8% (3) as a percentage of revenue (1) Adjusted for non-recurring items resulting mainly from major acquisitions (Transitions Optical and Coastal.com) (2) Contribution from operations = Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment (3) Before any new strategic acquisitions 2014 Results 83 Appendices Adjusted P&L The reported results include various non-recurring items linked primarily to the acquisition of Transitions Optical, Coastal.com, Costa and Xiamen Yarui Optical. Most of these items represent technical accounting entries with no impact on cash. The Company is publishing adjusted results which better reflect its underlying operating performance. The reported financial statements and the reconciliation of reported to adjusted financial statements are presented in the following pages. 2014 Results 85 Reported 2014 P&L In € millions Revenue 2013 Reported 2014 Reported 5,065 5,670 % Change +12.0% Gross profit 2,838 3,315 % of revenue 56.0% 58.5% 917 1,043 18.1% 18.4% Operating profit 843 1,222 Net profit 646 986 Profit attributable to equity holders 593 929 11.7% 16.4% 2.82 4.41 Contribution from operations(2) % of revenue % of revenue Earnings per share (in €) (1) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expenses and goodwill impairment. 2014 Results 86 From Reported to Adjusted 2014 P&L (1) In € millions 2014 Reported Non-recurring items Incl. Transitions & Coastal.com Revenue 5,670 - 5,670 Gross profit 3,315 (13) 3,328 % of revenue 58.5% Contribution from operations (2) % of revenue Other income (expense), net 1,043 2014 Adjusted(1) 58.7% (15) 18.4% 1,057 18.6% 179 247 (68) 1,222 232 989 Net profit 986 284 702 Profit attributable to equity holders 929 288 642 Operating profit % of revenue Earnings per share (in €) 16.4% 4.41 11.3% 1.37 3.05 (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. 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. (2) Operating profit before compensation costs for share-based payment plans, restructuring costs, other income and expenses, and goodwill impairment. Adjusted in 2014 for €15 million, of which €13 million step-up on inventories stemming from major acquisitions (Transitions Optical, Costa and Xiamen Yarui Optical) 2014 Results 87
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