Safilo Group — Investor Presentation 2015

Nov 5, 2015

1

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.

Notes in the presentation

In the first nine months of 2014, the adjusted economic results did not include non-recurring expenses for Euro 3.0 million related to the voluntary exit incentives recently signed with employees and trade unions, as the solidarity contracts come to an end, and to some reorganisation costs.

¹ 9M 2015 adjusted economic results do not include non-recurring items related to commercial restructuring costs in the EMEA region for Euro 1.2 million and other non recurring costs for Euro 1.2 million mainly related to the consolidation of the Group's North American distribution network into its Denver facility.

Introduction

Luisa Delgado, CEO

9M 2015 - Focus on our long-term journey for sustainable growth

Key highlights on Q3 results

• Growth continues in core markets and going-forward brand portfolio
• Dior, Future Core (Max Mara, Boss, Kate Spade) and Rockets (Fendi, Celine, J.Choo) leading strong progress in portfolio rebalance
• Polaroid and Smith performed well as strategy execution accelerates. Carrera positive where execution strong, while broader roll-out progresses gradually.
• Brand Health Monitor progressing well on all proprietary brands.
• European markets, North America wholesale, new emerging regions (MEA & Mexico in particular) driving growth, while Asia headwinds continue.

• Improving operating leverage

• Gross margin reflects expired licensed brands and FX impacts while key projects on planning interventions and COGS savings are starting to pay off
• Improvement in operating leverage compared to the first part of the year as the pace of growth of investments starts softening and cost efficiency projects become more evident.

• Continuing CASH FLOW GENERATION

• Strong cash flow results on the back of continued improvement of net working capital with NWC on net sales (LTM) at 22.7% in 9M.
• Net financial position and financial leverage at historic low

Q3 and 9M 2015 Results

Gerd Graehsler, CFO

Economic and Financial Performance

in millions of Euro	H1 2015	H1 2014	% Change	Q3 2015	Q3 2014	% Change	9M 2015	9M 2014	% Change
Total sales	674.9	606.3	+11.3%	284.8	261.2	+9.0%	959.7	867.5	+10.6%
Gross profit	409.9	383.5	+6.9%	167.5	157.1	+6.6%	577.4	540.6	+6.8%
%	60.7	63.3		58.8	60.1		60.2	62.3
EBITDA	60.3	68.7	-12.2%	14.7	14.6	+1.2%	75.1	83.3	-9.8%
Adjusted1 EBITDA	62.7	71.7	-12.6%	14.7	14.6	+1.2%	77.4	86.3	-10.3%
%	9.3	11.8		5.2	5.6		8.1	9.9
Group net result	8.4	29.3	-71.5%	2.4	2.4	+2.2%	10.8	31.7	-65.9%
Adjusted1 Group net result	9.9	31.5	-68.5%	2.4	2.4	+2.2%	12.4	33.9	-63.5%
%	1.5	5.2		0.9	0.9		1.3	3.9
Group Net Debt	110.1	166.1	-33.7%				97.1	158.9	-38.9%
Free Cash Flow	51.6	(6.4)		15.1	(3.9)		66.8	(10.3)

Sales performance @ constant exchange rates BY REGION

TOTAL SALES: +1.0% in 9M 2015 ; +0.9% in Q3 2015

STRONG MOMENTUM IN EUROPE AND NORTH AMERICA

Sales performance @ constant exchange rates BY REGION

EXPANDING SAFILO'S GEOGRAPHIC PRESENCE

Key operating drivers:

• Gross margin dilution: -130 bps Q3
• Negative FX impact on gross margin
• Discontinued licensed brands impacting
• Efficiency projects starting to materialize -> Q3 gross margin @ constant FX and license discontinuations up vs. YA
• SG&A
• Improving operating leverage in Q3 compared to first part of the year, reflecting increasing cost efficiency initiatives
• EBITDA Margin excluding FX and impact of license discontinuations +110bps in Q3

Adjusted¹Group Net result

Beyond operating performance:

• Higher financial charges reflect
• lower net interest charges
• lower fair value valuation of equity-linked bond
• Net negative exchange differences behind devaluation of certain emerging market currencies

…in Q3 fully offset by gain for the sale of the equity shareholding in associate company

Cash Flow and Net Debt highlights

Key Cash Flow drivers:

• Continuing cash generation from NET WORKING CAPITAL
• Driven by Receivables and lower Inventory absorption vs. YA
• Marked improvement of DSO and Inventory DOH
• Higher CAPEX
• Plant investments in technology as per Supply Chain 2020 strategy
• IT investments per EyeWay 2020 strategy
• Euro 30m first compensation payment from Kering in Jan 2015
• Euro 8.6m from sale of all shares held in associate company

	9M 2015	H1 2015		9M 2014
Cash Flow from operating activities	86.6	67.0		17.5
Cash Flow for investing activities	(19.8)	(15.4)		(27.8)
Free Cash Flow	66.8	51.6		(10.3)
			%		%
Net Debt	97.1	110.1	-11.8	158.9	-38.9
Net Debt/adj.1EBITDA(LTM)	0.9x	1.0x		1.3x

Progress on 2020 Strategies

Luisa Delgado, CEO

BRAND HEALTH MONITOR

All three Safilo proprietary brands increased their Brand Health in the period February-September 2015

• Carrera brand health is evolving well where strong execution e.g. USA, Mexico, Germany
• Development not consistent in all markets also as a result of in-store execution
• Focus on integrating key learnings and sharpening the 'Out There' campaign & product design for the 2016 campaign
• Strategy drives Polaroid from a basic-functional into more emotional and cool brand. Brand health showing clear progress in all markets
• Key strategy focus to increase Smith total awareness and familiarity, starting to conquer new consumer targets is working and reflected in good brand health progress.

Balance across consumer market segments

Safilo and Elie Saab announced their new eyewear

"With this new brand, we enhance our portfolio and open new opportunities for Safilo to play in the Atelier segment, as outlined by our 2020 Strategic Plan."

• a nine year licensing agreement
• from January 2017 in a selected network of exclusive eyewear specialists and in ELIE SAAB boutiques worldwide
• crafted in Italy and Japan, using the most refined and qualitative techniques

Safilo and Alpargatas announced the new Havaianas eyewear

"With Havaianas, we add significant value to our portfolio and strengthen our corporate play in the fast growing big mass-cool consumer segment, as anticipated by our 2020 Strategic Plan."

• a six year licensing agreement
• from August 2016, designed, developed, manufactured and distributed by Safilo across the world through an extensive, high quality distribution network

Balance across geographies

Future core markets

After eight years of absence, Safilo returns to the 2015 SILMO, the international optics and eyewear trade fair taking place in Paris!

• Showcasing our broad brand portfolio, with a special focus on:
• 1) our own core brands, Polaroid, Carrera and Smith
• 2) France and MEA, among our fastest growing markets

Balance across geographies

Whitespaces

Safilo opens its wholly owned subsidiary in Turkey, making it the hub of its new Central Eastern European Division

"Turkey represents a unique and fast-growth opportunity for us, where we can offer Safilo's total brand portfolio and build business with retailers across all channels. We will immediately start with the launch of two new brands never before distributed in Turkey, Fendi in the high-end fashion luxury segment, and Polaroid in the mass-cool segment."

Focus to build breakthrough capability

Smith integration and global Design Studios network

• 1) Smith integration as enabler for growth well on track
• 2) New outdoor inspired product design studio in Portland

Focus to build Breakthrough Capability

SMILE – Safilo's Category Management Program

• 3.200 Active Doors (+25% vs YA)

Excellent Results for Customer & Safilo:

• Sell-Out Increase
• Stock Reduction @ the customer

Global Integrated Planning Systems & Processes

Building the road to 2020 along our 3 Supply Network Re-Invention Strategies

1. Made in Safilo

• Started In-Sourcing of key components and finished products across plants
• Continued strong results in Product Quality

2. Manufacturing Network Re-Invention

• Started optimization of key plant flows and layout in Italian plants new processes starting to come on stream
• Cost savings initiatives starting to offset and deliver beyond cost inflation

3. Distribution Network Upgrade

• USA distribution centre consolidation into Denver live since September and fully on track
• 2016 roadmap clearly mapped out with further distribution centre shutdowns and regional consolidations

Foundation: Product Supply Organization Capability Step-Change

• New global Product Supply Leadership Team fully in place and effective

Thank you

Among the most loved and editorially featured eyewear worldwide

Appendices

Economic results

	9M 2015	%	9M 2014	%	% Change	Q3 2015	%	Q3 2014	%	% Change
Net sales	959.7	100.0	867.5	100.0	10.6%	284.8	100.0	261.2	100.0	9.0%
Cost of sales	(382.3)	(39.8)	(326.9)	(37.7)	16.9%	(117.3)	(41.2)	(104.2)	(39.9)	12.6%
Gross profit	577.4	60.2	540.6	62.3	6.8%	167.5	58.8	157.1	60.1	6.6%
Selling and marketing expenses	(402.6)	(41.9)	(362.6)	(41.8)	11.0%	(119.2)	(41.9)	(111.8)	(42.8)	6.6%
General and administrative expenses	(128.2)	(13.4)	(117.4)	(13.5)	9.2%	(44.1)	(15.5)	(38.9)	(14.9)	13.3%
Other operating income/(expenses), net	(1.4)	(0.1)	(3.4)	(0.4)	-58.7%	0.4	0.1	(0.6)	(0.2)	n.s.
Operating profit	45.2	4.7	57.2	6.6	-20.9%	4.5	1.6	5.7	2.2	-20.3%
Interest expenses and other financial charges, net	(23.9)	(2.5)	(7.2)	(0.8)	n.s.	(0.0)	(0.0)	(1.8)	(0.7)	-97.5%
Profit before taxation	21.4	2.2	50.0	5.8	-57.3%	4.5	1.6	3.9	1.5	16.3%
Income taxes	(10.4)	(1.1)	(18.1)	(2.1)	-42.4%	(2.0)	(0.7)	(1.4)	(0.6)	42.0%
Net profit	10.9	1.1	31.9	3.7	-65.7%	2.4	0.9	2.4	0.9	1.0%
Net profit attributale to minority interests	0.1	0.0	0.2	0.0	-35.7%	0.0	0.0	0.0	0.0	-63.2%
Net profit attributable to the Group	10.8	1.1	31.7	3.7	-65.9%	2.4	0.9	2.4	0.9	2.2%
EBITDA	75.1	7.8	83.3	9.6	-9.8%	14.7	5.2	14.6	5.6	1.2%
ECONOMIC INDICATORS PRE NON-RECURRING ITEMS
EBIT pre non-recurring	47.6	5.0	60.2	6.9	-20.9%	4.5	1.6	5.7	2.2	-20.2%
EBITDA pre non-recurring	77.4	8.1	86.3	9.9	-10.3%	14.7	5.2	14.6	5.6	1.2%
Net profit attributable to the Group pre non-recurring	12.4	1.3	33.9	3.9	-63.5%	2.4	0.9	2.4	0.9	2.2%

Net sales performance

in millions of Euro

Net sales performance
in millions of Euro
Net sales by geographical area	9M 2015	%	9M 2014	%	% Change	% Change (*)
Europe	378.3	39.4	361.3	41.6	4.7%	4.5%
North America	403.6	42.1	327.8	37.8	23.1%	2.4%
Latin America	36.4	3.8	37.5	4.3	-2.8%	0.8%
Asia Pacific	118.2	12.3	123.2	14.2	-4.1%	-17.3%
Rest of the world	23.2	2.4	17.7	2.0	31.1%	30.0%
Total	959.7	100.0	867.5	100.0	10.6%	1.0%
Net sales by geographical area	Q3 2015	%	Q3 2014	%	% Change	% Change (*)

Europe	101.7	35.7	96.2	36.8	5.6%	5.4%
North America	133.1	46.7	111.7	42.8	19.2%	1.5%
Latin America	10.8	3.8	13.8	5.3	-21.6%	-8.1%
Asia Pacific	31.4	11.0	33.6	12.9	-6.5%	-15.5%
Rest of the world	7.8	2.7	5.9	2.3	32.1%	32.3%
Total	284.8	100.0	261.2	100.0	9.0%	0.9%
Net sales by distribution channel	9M 2015	%	9M 2014	%	% Change	% Change (*)

Wholesale	890.7	92.8	805.8	92.9	10.5%	1.7%
Retail	69.0	7.2	61.8	7.1	11.7%	-8.1%
Total	959.7	100.0	867.5	100.0	10.6%	1.0%
Net sales by distribution channel	Q3 2015	%	Q3 2014	%	% Change	% Change (*)

Wholesale	262.7	92.3	239.2	91.5	9.9%	2.5%
Retail	22.1	7.7	22.1	8.5	-0.1%	-16.0%
Total	284.8	100.0	261.2	100.0	9.0%	0.9%

(*) at constant exchange rates

	September 30, 2015	December 31, 2014	Change
Net working capital	288.9	303.1	(14.3)
Tangible and intangible fixed assets	872.5	841.2	31.3
Financial fixed assets	0.0	7.6	(7.6)
Other assets / (liabilities), net	(25.0)	(14.5)	(10.6)
Net invested capital	1,136.4	1,137.5	(1.2)
Net financial position	(97.1)	(163.3)	66.1
Group Shareholders' equity	(1,036.9)	(971.5)	(65.4)
Non-controlling interests	(2.3)	(2.7)	0.4

	September 30, 2015	September 30, 2014	Change	December 31, 2014	Change
Trade receivables, net	228.3	244.5	(16.2)	266.3	(38.0)
Inventories	255.1	256.3	(1.2)	247.6	7.5
Trade payables	(194.5)	(200.7)	6.2	(210.8)	16.3
Net working capital	288.9	300.1	(11.1)	303.1	(14.2)
% net sales LTM	22.7%	26.2%		25.7%

	9M 2015	9M 2014	Q3 2015	Q3 2014
Net result and other charges	40.2	51.9	5.7	2.4
Change in working capital	46.4	(34.4)	13.8	3.4
Cash flow operating activities	86.6	17.5	19.5	5.8
Cash flow investing activities	(19.8)	(27.8)	(4.4)	(9.7)
Free cash flow	66.8	(10.3)	15.1	(3.9)

Exchange Rates

		As of		(Appreciation)/ Depreciation (*)	Avgerage for		(Appreciation)/ Depreciation (*)
Currency	Code	September 30, 2015	December 31, 2014	%	2015	2014	%
US Dollar	USD	1.1203	1.2141	-7.7%	1.1144	1.3549	-17.8%
Hong-Kong Dollar	HKD	8.6824	9.4170	-7.8%	8.6397	10.5067	-17.8%
Swiss Franc	CHF	1.0915	1.2024	-9.2%	1.0621	1.2180	-12.8%
Canadian Dollar	CAD	1.5034	1.4063	6.9%	1.4038	1.4819	-5.3%
Japanese Yen	YEN	134.6900	145.2300	-7.3%	134.7776	139.4859	-3.4%
British Pound	GBP	0.7385	0.7789	-5.2%	0.7271	0.8118	-10.4%
Swedish Krown	SEK	9.4083	9.3930	0.2%	9.3709	9.0405	3.7%
Australian Dollar	AUD	1.5939	1.4829	7.5%	1.4631	1.4760	-0.9%
South-African Rand	ZAR	15.4984	14.0353	10.4%	13.7010	14.5356	-5.7%
Russian Ruble	RUB	73.2416	72.3370	1.3%	66.5974	48.0152	38.7%
Brasilian Real	BRL	4.4808	3.2207	39.1%	3.5257	3.1028	13.6%
Indian Rupee	INR	73.4805	76.7190	-4.2%	70.8549	82.2624	-13.9%
Singapore Dollar	SGD	1.5921	1.6058	-0.9%	1.5201	1.7039	-10.8%
Malaysian Ringgit	MYR	4.9237	4.2473	15.9%	4.2163	4.3925	-4.0%
Chinese Renminbi	CNY	7.1206	7.5358	-5.5%	6.9641	8.3544	-16.6%
Korean Won	KRW	1,328.2700	1,324.8000	0.3%	1,252.6329	1,411.6170	-11.3%
Mexican Peso	MXN	18.9768	17.8679	6.2%	17.3653	17.7720	-2.3%
Dirham United Emirates	AED	4.1126	4.45942	-7.8%	4.0912	4.8923	-16.4%

(*) Appreciation (figures with a minus sign in the table above) indicates an increase in the value of the currency against the Euro.

Brands Portfolio

Licensed brands

Brand					Expiry Date
	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024

Licensed brands

Brand					Expiry Date
	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024