Safilo Group — Investor Presentation 2015

Aug 4, 2015

Q2 and H1 2015 Results

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 half 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 H1 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

H1 2015 - Focused on our long-term journey for sustainable growth

Good progress on 2020 Initiatives Investing for the Future

• Good growth in key Western European markets
• Solid business in North America
• Progress on newly established regions: Latam and MEA
• Continued weakness behind turnaround in Asia and Russia
• Positive development in licensed brand portfolio rebalance
• Positive results on proprietary brands where new strategies are fully executed: comm's + in-store + new product
• Brand building investments now in-market as per 2020 plan
• With US started first step of consolidation of logistics network
• Progress on Operations particularly on the Cash side, while COGS savings expected to start offsetting inflation from 2HY
• Strong focus and progress on Capability renewal

H1 2015 - Focused on our long-term journey for sustainable growth

4

Economic and financial performance

• Positive sales momentum in key markets
• Sales growth across all key licensed brands
• Trends in proprietary brands still patchy
• Business performance (ex Kering brands) accelerating in Q2
• Subdued Operating performance
• Gross margin of 60.7% (60.9% in Q2) facing high comparative periods and cost increases not yet offset by industrial efficiencies
• Investment momentum in core marketing and advertising activities
• Strong Cash flow generation
• Continued improvement of net working capital management. NWC on net sales (LTM) below 25%
• Net financial position and financial leverage at historic low

5

Q2 and H1 2015 Results

Gerd Graehsler, CFO

Economic and Financial Performance

in millions of Euro	Q1 2015	Q1 2014	% Change	Q2 2015	Q2 2014	% Change	H1 2015	H1 2014	% Change
Total sales	324.3	293.2	+10.6%	350.6	313.1	+12.0%	674.9	606.3	+11.3%
Gross profit	196.6	184.0	+6.8%	213.4	199.5	+7.0%	409.9	383.5	+6.9%
EBITDA	31.4	35.4	-11.5%	29.0	33.3	-12.9%	60.3	68.7	-12.2%
Adjusted1 EBITDA	32.6	35.4	-8.2%	30.2	36.3	-16.9%	62.7	71.7	-12.6%
Group net result	1.4	16.5	-91.2%	6.9	12.9	-46.2%	8.4	29.3	-71.5%
Adjusted1 Group net result	2.3	16.5	-86.3%	7.7	15.0	-49.0%	9.9	31.5	-68.5%
Group Net Debt	128.3	207.5	-38.2%				110.1	166.1	-33.7%
Free Cash Flow	32.1	(24.6)					51.6	(6.4)

NA Q1 +5.3% CN Q2 +0.8% CN Asia 15% Q2 -6.0% CN Latam Q1 +23.4% CN 40% 4% Q2 -13.4% CN ASIA Q1 -22.9% CN 13% • Sales growth acceleration in key countries. Italy and France gaining momentum • Underlying wholesale business up mid-single digit also in Q2 • Soft performance of Solstice • Phasing of deliveries between quarters TOTAL SALES: H1 2015 +1.0% CURRENCY NEUTRAL (Q2 2015: +1.2% CN) Europe Q1 +2.8% CN Q2 +5.4% CN 41% • Comp Base "pre-turnaround" -> Korea and ASEAN markets H1 +4.1% CN H1 +2.9% CN H1 -18.0% CN H1 +5.9% CN

• Challenging environment in China • Growth momentum in Australia

• Strong travel retail business
• Q2 +6.4% excluding Russia

Key operating drivers:

• Gross margin dilution: -260 bps H1, -280 bps Q2
• savings projects trailing cost inflation
• inventory obsolescence provision
• different phasing of plant costs
• SG&A
• Marketing and advertising investments
• Strengthening of core business capabilities

Beyond operating performance:

• H1 mainly impacted by financial charges:
• net negative FX differences recorded in Q1
• fair value valuation of the equity-linked bond

Key Cash Flow drivers:

• Q2 cash generation from net working capital
• Driven by Inventories and Receivables
• Marked improvement of DSO and Inventory DOH
• Euro 30m first compensation payment from Kering in January 2015 -> FCF still positive without.

• CapEx

• improvement of plants as part of supply network reinvention strategy
• investments into IT as per EyeWay strategy

	H1 2015	H1 2014
Cash Flow from operating activities	67.0	11.7
Cash Flow for investing activities	(15.4)	(18.1)
Free Cash Flow	51.6	(6.4)
		%
Net Debt	110.1	166.1 -33.7
Net Debt/adj.1 EBITDA (LTM)	1.0x	1.4x

Conclusion

Luisa Delgado, CEO

'Tiering strategy' implementation

Unprecedented brand visibility

• Big Out Of Home campaigns
• New high impact POS material
• Strong windows and in store customization in priority points of sales

Digital generating high consumer engagement

• +500% online results vs 2014
• 1,7 million likes (instagram and facebook)

New Collection roll-out

• Good performance of the new core collection where executed with excellence

In-market executions

OOH Campaigns: GUERRILLA MARKETING

Points of sales: PREMIUM WINDOWS VISIBILITY

Our priorities in H2:

• Accelerate product re-assortment/merchandising to support core collection distribution
• Boost Optical business momentum
• Focus on Interchangeable + Junior as core building blocks
• Continue Brand activation plan through multi asset platform

YOU'LL SEE campaign live

Big Out of Home campaigns

First ever TVC – "Kiss" and "Father & Son"

Strong POS and Consumer activation (new POP generation and 2° placements)

New approach on seasonal projects (innovative trade marketing and dedicated spaces)

Core collection to cover any type of consumer

+30 positions in global DMR ranking and TOP 10 of Safilo's brands

+650K users reached on social media

Our priorities in H2:

• Accelerate on new distribution
• Boost Rainbow 2.0
• Boost Kids category
• Enhance flash collections
• Continue Brand activation plan through multi asset platform

Our building blocks

First ever 360 degree campaign developed and launched, including TVC – The Pursuit

North America Optical channel, leveraging on Safilo's commercial organisation

New sports channel in Europe

E-commerce

In-market executions

POINTS OF SALES

Our priorities in H2:

• Accelerate fish/marine expansion behind ChromaPop technology
• Boost Snow and Bike
• Continue the integration into Safilo, stepchanging product design in lifestyle sun and frames
• Launch B2C in Europe

The Safilo Product School opens its doors for the first time on September 14th! The first 9 selected participants start their three-year apprenticeship

Appendices

Economic results

in millions of Euro

	H1 2015	%	H1 2014	%	% Change	Q2 2015	%	Q2 2014	%	% Change
Net sales		674.9 100.0		606.3 100.0	11.3%		350.6 100.0		313.1 100.0	12.0%
Cost of sales		(265.0) (39.3)	(222.8) (36.7)		19.0%		(137.2) (39.1)		(113.6) (36.3)	20.8%
Gross profit		409.9 60.7		383.5 63.3	6.9%		213.4 60.9		199.5 63.7	7.0%
Selling and marketing expenses		(283.3) (42.0)	(250.8) (41.4)		13.0%		(149.9) (42.8)		(131.2) (41.9)	14.3%
General and administrative expenses		(84.1) (12.5)		(78.5) (12.9)	7.2%		(43.8) (12.5)		(40.8) (13.0)	7.4%
Other operating income/(expenses), net		(1.8) (0.3)		(2.8) (0.5)	-36.8%		(1.1) (0.3)		(2.8) (0.9)	-61.1%
Operating profit	40.7	6.0	51.5	8.5	-20.9%	18.6	5.3	24.7	7.9	-24.7%
Interest expenses and other financial charges, net		(23.8) (3.5)		(5.4) (0.9)	n.s.		(5.1) (1.4)		(3.0) (1.0)	67.7%
Profit before taxation	16.9	2.5	46.1	7.6	-63.4%	13.5	3.9	21.7	6.9	-37.6%
Income taxes		(8.4) (1.2)		(16.7) (2.7)	-49.6%		(6.5) (1.9)		(8.7) (2.8)	-25.3%
Net profit	8.5	1.3	29.5	4.9	-71.2%	7.0	2.0	12.9	4.1	-45.9%
Net profit attributale to minority interests	0.1	0.0	0.2	0.0	-29.1%	0.1	0.0	0.1	0.0	5.5%
Net profit attributable to the Group	8.4	1.2	29.3	4.8	-71.5%	6.9	2.0	12.9	4.1	-46.2%
EBITDA	60.3	8.9		68.7 11.3	-12.2%	29.0	8.3		33.3 10.6	-12.9%
ECONOMIC INDICATORS PRE NON-RECURRING ITEMS
EBIT pre non-recurring	43.1	6.4	54.5	9.0	-21.0%	19.8	5.6	27.7	8.8	-28.7%
EBITDA pre non-recurring	62.7	9.3		71.7 11.8	-12.6%	30.2	8.6		36.3 11.6	-16.9%

Net profit attributable to the Group pre non-recurring 9.9 1.5 31.5 5.2 -68.5% 7.7 2.2 15.0 4.8 -49.0%

Net sales performance

in millions of Euro

Net sales by distribution channel	H1 2015	%	H1 2014	%	% Change	% Change (*)
Total	350.6	100.0	313.1	100.0	12.0%	1.2%
Rest of the world	8.6	2.5	6.1	1.9	42.5%	41.3%
Asia Pacific	47.5	13.5	46.1	14.7	3.0%	-13.4%
Latin America	13.1	3.7	14.1	4.5	-6.9%	-6.0%
North America	137.6	39.3	111.4	35.6	23.5%	0.8%
Europe	143.8	41.0	135.4	43.3	6.1%	5.4%
Net sales by geographical area	Q2 2015	%	Q2 2014	%	% Change	% Change (*)
Total	674.9	100.0	606.3	100.0	11.3%	1.0%
Rest of the world	15.4	2.3	11.8	2.0	30.5%	28.9%
		12.8		14.8
Latin America Asia Pacific	25.6 86.7	3.8	23.7 89.6	3.9	8.2% -3.2%	5.9% -18.0%
North America	270.5	40.1	216.1	35.6	25.1%	2.9%
Europe	276.7	41.0	265.0	43.7	4.4%	4.1%
Net sales by geographical area	H1 2015	%	H1 2014	%	% Change	% Change (*)
in millions of Euro

Wholesale	627.9	93.0	566.6	93.4	10.8%	1.3%
Retail	47.0	7.0	39.7	6.6	18.2%	-3.7%
Total	674.9	100.0	606.3	100.0	11.3%	1.0%
Net sales by distribution channel	Q2 2015	%	Q2 2014	%	% Change	% Change (*)

Wholesale Retail	323.4 27.2	92.2	289.8 23.2	92.6	11.6% 17.1%	1.7% -5.3%
Total	350.6	7.8 100.0	313.1	7.4 100.0	12.0%	1.2%

(*) at constant exchange rates

in millions of Euro

	June 30, 2015	December 31, 2014	Change
Net working capital	307.9	303.1	4.8
Tangible and intangible fixed assets	877.9	841.2	36.7
Financial fixed assets	7.1	7.6	(0.5)
Other assets / (liabilities), net	(31.7)	(14.4)	(17.3)
Net invested capital	1,161.2	1,137.5	23.7
Net financial position	(110.1)	(163.3)	53.2
Group Shareholders' equity	(1,048.8)	(971.5)	(77.3)
Non-controlling interests	(2.3)	(2.7)	0.4

in millions of Euro

	June 30, 2015	June 30, 2014	Change
Trade receivables, net	279.8	280.5	(0.7)
Inventories	247.5	230.6	16.9
Trade payables	(219.4)	(216.2)	(3.2)
Net working capital	307.9	294.9	13.0
% net sales LTM	24.7%	26.1%

in millions of Euro

Free cash flow	H1 2015	H1 2014	Q2 2015	Q2 2014
Net result and other charges	34.5	49.5	7.4	21.4
Change in working capital	32.5	(37.8)	22.5	7.3
Cash flow operating activities	67.0	11.7	29.9	28.7
Cash flow investing activities	(15.4)	(18.1)	(10.3)	(10.5)
Free cash flow	51.6	(6.4)	19.6	18.2

Exchange Rates

		As of		(Appreciation)/ Depreciation (*)	Avg. for the quarter	(Appreciation)/ Depreciation (*)
Currency	Code	June 30, 2015	December 31, 2014	%	2015	2014	%
US Dollar	USD	1.1189	1.2141	-7.8%	1.1158	1.3703	-18.6%
Hong-Kong Dollar	HKD	8.6740	9.4170	-7.9%	8.6517	10.6292	-18.6%
Swiss Franc	CHF	1.0413	1.2024	-13.4%	1.0567	1.2215	-13.5%
Canadian Dollar	CAD	1.3839	1.4063	-1.6%	1.3774	1.5029	-8.4%
Japanese Yen	YEN	137.0100	145.2300	-5.7%	134.2042	140.4028	-4.4%
British Pound	GBP	0.7114	0.7789	-8.7%	0.7323	0.8213	-10.8%
Swedish Krown	SEK	9.2150	9.3930	-1.9%	9.3401	8.9535	4.3%
Australian Dollar	AUD	1.4550	1.4829	-1.9%	1.4261	1.4989	-4.9%
South-African Rand	ZAR	13.6416	14.0353	-2.8%	13.3048	14.6758	-9.3%
Russian Ruble	RUB	62.3550	72.3370	-13.8%	64.6407	47.9924	34.7%
Brasilian Real	BRL	3.4699	3.2207	7.7%	3.3101	3.1499	5.1%
Indian Rupee	INR	71.1873	76.7190	-7.2%	70.1244	83.2889	-15.8%
Singapore Dollar	SGD	1.5068	1.6058	-6.2%	1.5061	1.7279	-12.8%
Malaysian Ringgit	MYR	4.2185	4.2473	-0.7%	4.0621	4.4771	-9.3%
Chinese Renminbi	CNY	6.9366	7.5358	-8.0%	6.9408	8.4500	-17.9%
Korean Won	KRW	1,251.2700	1,324.8000	-5.6%	1,227.3118	1,438.2898	-14.7%
Mexican Peso	MXN	17.5332	17.8679	-1.9%	16.8887	17.9747	-6.0%
Dirham United Emirates	AED	4.1075	4.45942	-7.9%	4.0967	4.9894	-17.9%

(*) 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
	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024

Licensed brands

Brand		Expiry Date
	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024