Safilo Group — Investor Presentation 2016

Aug 3, 2016

H1 2016 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.

H1 2016 BUSINESS AND ECONOMIC HIGHLIGHTS

• Net Sales performance affected by brands we stopped/ will stop servicing + challenging macro conditions

• Going-forward brands portfolio gaining momentum in Q2 in key markets
• Progress driven by strategic licensed brands. Better momentum on Polaroid, Carrera still subdued while Smith overall mixed
• Delivery performance back on track

NET SALES

H1 2016 BUSINESS AND ECONOMIC HIGHLIGHTS

• Adj. ¹ economic performance affected by brands we stopped/ will stop servicing + challenging macro conditions

• Progress on cost savings driving operating performance improvement in Q2
• Strong increase in the Net Results reflecting positive dynamics in net financial charges
• Healthy financial leverage and Capex acceleration

NET SALES PERFORMANCE

in millions of Euro

5

PROGRESS IN KEY MARKETS

H1 2016 +5.3% @ CFX (Wholesale +6.8%)

EUROPE	NORTH AMERICA	ASIA	ROW
	Total +2.0%
+11.8%	Wholesale +5.4%	-14.4%	+7.6%

Q2 2016 +9.0% @ CFX (Wholesale +11.2%)

• Solstice stores subdued

• All core markets delivering positive trends Broad based positive •	• Positive wholesale business performance across chnnels	• Persisting weakness in Hong Kong and Korea • Travel retail still a key	• Strong performance of IMEA • Latin America turning positive
+18.6%	Total +3.1% Wholesale +7.6%	-14.2%	+12.3%
EUROPE	NORTH AMERICA	ASIA	ROW

restrainer

performing well

• Australia and South East

• Broad based positive performance by channel
• Smile roll-out progressing strongly

GROSS MARGIN PERFORMANCE

6

KEY DRIVERS

• Wholesale gross margin up 10 bps in H1, down 40 bps in Q2
• Positive price/mix effect on going-forward business
• Better fixed cost absorption in the plants
• Dilution from performance of Gucci, retail and exchange rates

ADJ.¹ EBITDA PERFORMANCE

KEY DRIVERS

• Wholesale adj. ¹ EBITDA margin up 30 bps in H1 and 160 bps in Q2
• Sales and cost savings driving improved operating leverage in Q2
• Dilution from performance of Gucci, retail and exchange rates

ADJ.¹ GROUP NET PERFORMANCE

in millions of Euro

KEY DRIVERS

• Positive dynamic of net financial charges:

FREE CASH FLOW

in millions of Euro

Cash Flow from Operating Activities

KEY DRIVERS

• WC absorption driven by an increase of trade receivables due to top line acceleration, and of inventories
• NWC incidence on net sales LTM 24.3% vs 24.7% in H1 2015

FREE CASH FLOW
51.6
ADJ.2 21.6	(9.3)

• Higher CAPEX for +7m for plant investments + EYEWAY project

GROUP NET DEBT

Q1 2015 H1 2015 9M 2015 FY 2015 Q1 2016 H1 2016

HIGHLIGHTS

DEMAND PLANNING GO-LIVE

The process that enables the development of demand forecasts as input for planning activities, went live in Q2 for the EMEA region. The project is already started also in the US, and is leading to an end within this year.

POLAROID – KEY INITIATIVES

HERO PROJECT SUN 1° HALF 2016

With its vibrant colors, flexibility and lightweight feel, Polaroid's TWIST COLLECTION is the perfect match between cool and practical, combining comfort with strength, and perfect anywhere, anytime.

LAUNCH OPTICAL COLLECTION

POLAROID – KEY INITIATIVES

A 360° HOLISTIC EVENT POWERED BY POLAROID

POS visibility, Consumer contest, Territory impactful installation & advertising (BILLBOARD OOH), Digital viralisation, TV (Spain), Radio (France) 5 COUNTRIES: ITALY, SPAIN, FRANCE, UK, SWEDEN +WORLDWIDE INVOLVEMENT OF OPINION LEADERS, CUSTOMERS, AND CLIENTS.

SWEDEN

Stureplan Double Billboard

SPAIN Plaza Callao Pixel Domination

FRANCE

Official UEFA Fan Zone -Champ de Mars Giant Digital Out of Home Paris L'Opera Billboard

UK

Piccadilly Cyrcus Digital Out of Home

CARRERA – KEY INITIATIVES

• Maverick collection broadly in stores, supported by PR campaigns
• Another step in qualifying the stylistic direction of the brand
• For Carrera sun, it is key to offer multiple design options for different consumers, markets and customers
• Increasing focus on optical, Rx-ability and the web

PR Campaigns

Maverick in Store Activation

Digital

SMITH – KEY INITIATIVES

• Focus on eyewear design enhancement
• Focus on Chromapop technology
• Brand ambassador activation in EMEA sniper countries to drive brand and Chromapop awareness
• Further e-commerce boost
• Bike expansion behind product innovation

AMONG THE MOST LOVED AND EDITORIALLY FEATURED EYEWEAR WORLDWIDE

Appendices

1 In the first half of 2016, the adjusted operating results do not include non-recurring costs for a total of Euro 7.1 million (6.1 million on EBITDA), related for Euro 5.9 million to overhead cost saving initiatives, such as the planned integration of Vale of Leven (Scotland) Polaroid lens production into Safilo's China based corporate supply network, and for Euro 1.2 million to commercial restructuring costs in the EMEA region.

In the first half of 2015, the adjusted economic results do not include non-recurring costs for a total of Euro 2.4 million 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.

2 In the first half of 2015, the adjusted Cash Flow from operating activities and Free Cash flow do not include the first of three compensation payments of Euro 30 million received in January 2015 from Kering.

Economic results

in millions of Euro	H1 2016	%	H1 2015	%	% Change
Net sales	651.1	100.0	674.9	100.0	-3.5%
Cost of sales	(256.5)	(39.4)	(265.0)	(39.3)	-3.2%
Gross profit	394.6	60.6	409.9	60.7	-3.7%
Selling and marketing expenses	(272.6)	(41.9)	(283.3)	(42.0)	-3.8%
General and administrative expenses	(85.1)	(13.1)	(84.1)	(12.5)	1.2%
Other operating income (expenses)	(6.6)	(1.0)	(1.8)	(0.3)	n.s.
Operating profit	30.4	4.7	40.7	6.0	-25.4%
Financial charges, net	0.8	0.1	(23.8)	(3.5)	n.s.
Profit before taxation	31.2	4.8	16.9	2.5	85.0%
Income taxes	(14.7)	(2.3)	(8.4)	(1.2)	74.9%
Net profit of the period	16.5	2.5	8.5	1.3	95.0%
Non-controlling interests	0.2	0.0	0.1	0.0	n.s.
Net profit attributable to owners of the Parent	16.3	2.5	8.4	1.2	94.8%
EBITDA	52.2	8.0	60.3	8.9	-13.4%
Adjusted Economic indicators
ADJ.1 EBIT	37.5	5.8	43.1	6.4	-12.8%
ADJ.1 EBITDA	58.3	8.9	62.7	9.3	-7.0%
ADJ.1 Net profit attributable to the Group	22.9	3.5	9.9	1.5	130.6%

Net sales performance

in millions of Euro

Net sales by geographical area	H1 2016	%	H1 2015	%	Change %	Change % (*)	Change % (**)
Europe	291.4	44.8	276.9	41.0	5.3%	6.1%	11.8%
North America	259.8	39.9	270.5	40.1	-3.9%	-3.4%	2.0%
Asia Pacific	58.8	9.0	83.0	12.3	-29.2%	-27.8%	-14.4%
Rest of the world	41.0	6.3	44.5	6.6	-7.9%	2.0%	7.6%
Total	651.1	100.0	674.9	100.0	-3.5%	-2.1%	5.3%

Net sales by distribution channel	H1 2016	%	H1 2015	%	Change %	Change % (*)	Change % (**)
Wholesale	612.4	94.1	627.9	93.0	-2.5%	-1.0%	6.8%
Retail	38.7	5.9	47.0	7.0	-17.7%	-17.7%	-12.8%
Total	651.1	100.0	674.9	100.0	-3.5%	-2.1%	5.3%

(*) at constant exchange rates

(**) Going forward brands portfolio excludes all brands Safilo stopped/will stop servicing. Performance at constant exchange rates.

Net sales by geographical area	Q2 2016	%	Q2 2015	%	Change %	Change % (*)	Change % (**)
Europe	161.4	46.2	144.0	41.1	12.0%	13.2%	18.6%
North America	132.7	38.0	137.6	39.3	-3.6%	-1.2%	3.1%
Asia Pacific	32.1	9.2	45.5	13.0	-29.5%	-27.3%	-14.2%
Rest of the world	23.4	6.7	23.4	6.7	-0.3%	9.5%	12.3%
Total	349.5	100.0	350.6	100.0	-0.3%	2.0%	9.0%

Net sales by distribution channel	Q2 2016	%	Q2 2015	%	Change %	Change % (*)	Change % (**)
Wholesale	327.6	93.7	323.4	92.2	1.3%	3.7%	11.2%
Retail	21.9	6.3	27.2	7.8	-19.5%	-18.2%	-13.7%
Total	349.5	100.0	350.6	100.0	-0.3%	2.0%	9.0%

(*) at constant exchange rates

(**) Going forward brands portfolio excludes all brands Safilo stopped/will stop servicing. Performance at constant exchange rates.

Balance Sheet

in millions of Euro

	June 30, 2016	December 31, 2015	Change
Net working capital	305.2	277.7	27.5
Tangible and intangible fixed assets	835.7	843.7	(8.0)
Non-current assets held for sale	9.7	9.9	(0.2)
Other assets / (liabilities), net	(49.8)	(42.8)	(7.0)
Net invested capital	1,100.8	1,088.5	12.3
Net financial position	(102.8)	(89.9)	(12.9)
Group Shareholders' equity	(996.7)	(997.5)	0.8
Non-controlling interests	(1.3)	(1.1)	(0.2)

in millions of Euro

	June 30, 2016	June 30, 2015	Change
Trade receivables	266.7	279.8	(13.1)
Inventories	268.6	247.5	21.1
Trade payables	(230.2)	(219.4)	(10.8)
Net working capital	305.2	307.9	(2.7)
% on net sales LTM	24.3%	24.7%

in millions of Euro

	H1 2016	H1 2015
Cash flow from operating activities before changes in working capital	31.9	34.5
Changes in working capital	(18.9)	32.5
Cash flow operating activities	13.0	67.0
Cash flow investing activities	(22.4)	(15.4)
Free cash flow	(9.3)	51.6

		As of		(Appreciation)/	Average for		(Appreciation)/
				Depreciation		Depreciation
Currency	Code	June 30, 2016	December 31, 2015	%	June 30, 2016	June 30, 2015	%
US Dollar	USD	1.1102	1.0887	2.0%	1.1157	1.1158	0.0%
Hong-Kong Dollar	HKD	8.6135	8.4376	2.1%	8.6669	8.6517	0.2%
Swiss Franc	CHF	1.0867	1.0835	0.3%	1.0959	1.0567	3.7%
Canadian Dollar	CAD	1.4384	1.5116	-4.8%	1.4846	1.3774	7.8%
Japanese Yen	YEN	114.0500	131.0700	-13.0%	124.4162	134.2042	-7.3%
British Pound	GBP	0.8265	0.7340	12.6%	0.7787	0.7323	6.3%
Swedish Krown	SEK	9.4242	9.1895	2.6%	9.3020	9.3401	-0.4%
Australian Dollar	AUD	1.4929	1.4897	0.2%	1.5218	1.4261	6.7%
South-African Rand	ZAR	16.4461	16.9530	-3.0%	17.1977	13.3048	29.3%
Russian Ruble	RUB	71.5200	80.6736	-11.3%	78.3228	64.6407	21.2%
Brasilian Real	BRL	3.5898	4.3117	-16.7%	4.1310	3.3101	24.8%
Indian Rupee	INR	74.9603	72.0215	4.1%	74.9940	70.1244	6.9%
Singapore Dollar	SGD	1.4957	1.5417	-3.0%	1.5398	1.5061	2.2%
Malaysian Ringgit	MYR	4.4301	4.6959	-5.7%	4.5734	4.0621	12.6%
Chinese Renminbi	CNY	7.3755	7.0608	4.5%	7.2955	6.9408	5.1%
Korean Won	KRW	1,278.4800	1,280.7800	-0.2%	1,318.8060	1,227.3118	7.5%
Mexican Peso	MXN	20.6347	18.9145	9.1%	20.1703	16.8887	19.4%
Turkish Lira	TRY	3.2060	3.1765	0.9%	3.25832	n.a.	n.a.
Dirham United Emirates	AED	4.0755	3.996618	2.0%	4.09588	4.0967	0.0%

•Polaroid YOU'LL SFF	Dior	JIMMY CHOO	swatch the oo eyes	BANANA REPUBLIC
CARRERA EAR SINCE 1956	CÉLINE	MARC JACOBS	havaianas	Juicy Couture los angeles, california
SMITH	FENDI	ELIE SAAB	BOBBI BROWN	Liz claiborne
	GIVENCHY PARIS	GUCCI	MAX&Co.
	MaxMara	kate spade NEW YORK	pierre cardin PARIS	- Jaks Avenue
OCCHIALI DAL 1934	HUGO BOSS	TOMMY INILFIGER	ISSUE Nº FOSSIL 1954	JACK SPADE