Safilo Group — Investor Presentation 2019

Dec 11, 2019

GROUP BUSINESS PLAN 2020-2024

December 11, 2019

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.

TODAY AGENDA

An Attractive Eyewear Industry

Safilo 2018-2019 Achievements

Our Roadmap to 2024

Financial Targets

TODAY AGENDA

AN ATTRACTIVE EYEWEAR INDUSTRY

Safilo 2018-2019 Achievements

Our Roadmap to 2024

Financial Targets

AN ATTRACTIVE EYEWEAR INDUSTRY WITH CLEAR GROWTH DRIVERS

Source: Euromonitor International data; BCG analysis; Safilo estimates

AN ATTRACTIVE EYEWEAR INDUSTRY WITH CLEAR GROWTH DRIVERS

Channels Digital overgrowing

EYEWEAR ONLINE SALES

(retail value and % incidence on Total Eyewear Sales)

Digital channels represent today around 7% of total eyewear sales, growing fast, with online platforms/multi brand websites and specialist players leading the growth. Omni-channel becomes more and more important

TODAY AGENDA

An Attractive Eyewear Industry

SAFILO 2018-2019 ACHIEVEMENTS

Our Roadmap to 2024

Financial Targets

SAFILO 2018-2019 ACHIEVEMENTS

CAPITAL INCREASE AND REFINANCING Recover a solid balance sheet

RENEWAL OF CORE LICENSES & SIGNING OF NEW Play a meaningful multi-segment strategy

RENEWAL KERING SUPPLY AGREEMENT Retention of production volumes and skills

ACQUISITION OF BLENDERS EYEWEAR Accelerate digital strategy and relevance of own core brands

DISPOSAL OF SOLSTICE RETAIL BUSINESS Refocus investments and capabilities

2019E ECONOMIC TURNAROUND

Recover top line growth and operating performance

RENEWAL OF CORE LICENSES AND SIGNING OF NEW

Most recent news in Safilo brand portfolio

SAFILO BRAND PORTFOLIO TOMORROW

Continue playing a meaningful multi-segment strategy

A DISRUPTIVE, DIGITALLY NATIVE EYEWEAR BRAND

• Founded in 2012 in San Diego by Chase Fisher;
• An advance e-commerce business with unique digital and social media skills;
• A compelling price-to-value eyewear product offer, appealing to a broad range of consumers with a focus on Millennials and Generation Z;
• A US business, approximately 95% on line;
• 2019E Net sales of ~\$42m and mid-teens EBITDA.

• On Dec 9, 2019 Safilo acquired 70% of the Company's equity for around \$63 million (subject to customary price adjustments b/w signing and closing).

• Chase Fisher will remain CEO of Blenders Eyewear which will continue to run out of its San Diego home.

ACQUISITION

A KEY PILLAR TO ACCELERATE D2C CAPABILITIES AND BUSINESS

• Rapid growth in high quality traffic, bring conversion to industry-leading levels
• Fine-tuned marketing strategy centred on paid digital advertising and sponsored programs, complemented by organic media
• Profitable business since inception, focused on a disciplined spending approach

2019 ECONOMIC TURNAROUND

2019 an important foundation for top line growth and improvement of underlying operating performance (EBITDA¹ )

Key Achievements:

• ALL OWN CORE BRANDS BACK TO GROWTH
• EUROPE AND KEY EMERGING MARKETS DRIVING AHEAD
• HIGHER INVESTMENTS IN DIGITAL AND SOCIAL MARKETING
• NEW COMMERCIAL LEADERSHIP WITH LOCAL ACCOUNTABILITY
• FIRST SIGNIFICANT IMPROVEMENT OF CUSTOMER SERVICE LEVELS/CLIENT SATISFACTION
• MORE EFFICIENT PRODUCTION PROCESSES AND OVERHEAD COST SAVINGS

2019 KEY EXECUTION PLANS

Carrera and Polaroid two significant showcases

DISTRIBUTION AND PRODUCT OFFER DRIVING INCREASING SELL IN AND SELL OUT PERFORMANCE

• strong product and collection consistency
• higher collection mix value
• collection rationalization and merchandising mix refresh

• higher productivity per door and network requalification

• wider and differentiated product clusters

• higher collection mix value
• higher productivity per door

MARKETING BOOSTING BRAND AND PRODUCT VISIBILITY AND INTENTION-TO-BUY

• focus on social and digital communication
• strong #driveyourstory# platform to engage consumers
• Alfa Romeo F1 sponsorship for visibility & engagement

• premium windows and in-store permanent visibility

• focus on social and digital communication

• strong #See Beyond# platform to engage consumers
• sell in/sell out activities leveraging on strong testimonials
• in-store visibility with seasonal and festivities concepts

TODAY AGENDA

An Attractive Eyewear Industry

Safilo 2018-2019 Achievements

OUR ROADMAP TO 2024

Financial Targets

for a modern and successful customer-centric and consumer-oriented business model

for a modern and successful customer-centric and consumer-oriented business model

• Core brands focus
• Market opportunity
• Product and Channel balance

NEW DIGITAL TRANSFORMATION STRATEGY

TO ENABLE A MODERN AND SUCCESSFUL CUSTOMER-CENTRIC AND CONSUMER-ORIENTED BUSINESS MODEL

while we continue leveraging our strongholds

LEADERSHIP IN DESIGN, PRODUCT DEVELOPMENT AND INNOVATION

GLOBAL COMMERCIAL FOOTPRINT KNOW-HOW IN BRAND MANAGEMENT

SALES GROWTH

NEW DIGITAL TRANSFORMATION STRATEGY

FOR A MODERN AND SUCCESSFUL CUSTOMER-CENTRIC-CONSUMER-ORIENTED BUSINESS MODEL

Strong DIGITAL MARKETING STRATEGY

Focus skills and investments into DIGITAL AND SOCIAL MARKETING to build BRAND AWARENESS and increase INTENTION TO BUY

TO STEP CHANGE CUSTOMER EXPERIENCE ENGAGEMENT & INSTORE PRODUCTIVITY

TO REACH OUT MORE FREQUENTLY, MORE EFFECTIVELY CONSUMERS

• Our priorities in DIGITAL & SOCIAL MARKETING SALES GROWTH

• Build on brand lifestyle and product stories across social media

• Increase relevance of digital contents in all main touchpoints
• Increase digital instore solutions and "drive to store" actions
• Enhance social media engagement (Facebook, Instagram), introducing the brand to new customers and engaging with current ones.

SALES GROWTH

NEW DIGITAL TRANSFORMATION STRATEGY

FOR A MODERN AND SUCCESSFUL CUSTOMER-CENTRIC-CONSUMER-ORIENTED BUSINESS MODEL

New B2B ECOSYSTEM

Redesign of our Sales, Customer Service and Customer Care processes to take them to the next level

TO STEP CHANGE CUSTOMER EXPERIENCE ENGAGEMENT & INSTORE PRODUCTIVITY

MULTIPLE INITIATIVES AND EXECUTION WAVES TO BECOME THE BEST BUSINESS PARTNER FOR OUR MANY EXISTING CLIENTS AND TO ATTRACT NEW

NEW BUSINESS OPPORTUNITIES AND HIGHER IN-STORE PRODUCTIVITY

GROWTH

Our priorities for a NEW B2B ECOSYSTEM SALES

3YR INVESTMENTS INTO THE LATEST DIGITAL TECHNOLOGIES

to redesign the full B2B journey for our Customers

New B2B Portal	New CRM	New Sale Force Automation
Strategic renewal to align all European markets, enhancing user experience	Reshape Customer Care activities for higher automation, more information, better interaction	State of the art platform for efficient order taking and new back office functionalities

BUSINESS CASE 'AR COLORS'

EXAMPLE OF NEW ENABLING DIGITAL TOOL Visualization of samples with AUGMENTED REALITY (AR), enhancing one of the main touchpoints we have with our customers

SALES GROWTH

NEW DIGITAL TRANSFORMATION STRATEGY

FOR A MODERN AND SUCCESSFUL CUSTOMER-CENTRIC-CONSUMER-ORIENTED BUSINESS MODEL

GROWTH

Our priorities in D2C E-COMMERCE BUSINESS SALES

GRADUAL DEVELOPMENT OF CARRERA AND POLAROID .COMS

RE-PLATFORMED SMITHOPTICS.COM IN US AND EUROPE

CONTINUE DRIVING BLENDERS EYEWEAR UNIQUESTRENGTHS

BRANDS.COM COMMERCIAL PARTNERSHIPS

SPECIALIZED FASHION E.TAILERS

• premium and upper premium brands
• focus on dedicated assortment and product innovation

GENERALIST E.TAILERS

• leverage our strong portfolio in contemporary and mass brands
• focus on service
• scout opportunity for dedicated brands

GROWTH

FOCUS ON CORE BRANDS, MARKET OPPORTUNITIES. PRODUCTS AND CHANNELS BALANCE SALES

Sales +6% 5Y CAGR

PRODUCTS AND CONSUMERS

• Expand optical business
• Upgrade Sunglasses collections while strengthening the cool segment

MARKETS & CHANNELS

• Expand distribution network across key markets and channels

MARKETING & COMMUNICATION

• Digital communication of the #See Beyond# Platform for consumer engagement
• Enhance the polarization storytelling
• Leverage on collaborations/capsule collections

GROWTH

FOCUS ON CORE BRANDS, MARKET OPPORTUNITIES. PRODUCTS AND CHANNELS BALANCE SALES

Sales +6% 5Y CAGR

PRODUCTS AND CONSUMERS

• Focus on product quality and clear collection structure
• Expand the Upper Contemporary segment
• Expand adult women and teenagers

MARKETS & CHANNELS

• Focus on POS quality/visibility and new collections to improve store productivity

MARKETING & COMMUNICATION

• Consistent evolution of the #driveyourstory# platform, with a digital-first mindset
• Collaborations & events to enlarge the consumer base, specifically the younger audience

FOCUS ON CORE BRANDS, MARKET OPPORTUNITIES. PRODUCTS AND CHANNELS BALANCE SALES GROWTH

Sales +6% 5Y CAGR

CONSOLIDATE LEADERSHIP IN PRODUCT INNOVATION

• boost brand visibility by targeted marketing campaigns to promote our strong product technology (ChromaPop, Koroyd)

BUILD NEW CONSUMER TARGET AND PRODUCT CATEGORIES

• Optimize assortments to reach new consumer target
• Step change capabilities and investments in social and digital marketing

EXPAND KEY MARKETS AND CHANNELS

• Overgrow Direct-to-Consumer business in US and Europe

CONTINUED RAPID E-COMMERCE GROWTH

• Remain at the forefront in the latest sales tools and e-com marketing
• Enhance social media engagement and relationship with key influencers

CATEGORY EXPANSION

• Expand affordable and trend-forward optical collections
• Launch collection for kids and expand sport offering

OFFLINE AND GEOGRAPHICAL EXPANSION

• Expand e-commerce outside US
• Develop offline business in and outside US, leveraging Safilo's global commercial organization

GROWTH

FOCUS ON CORE BRANDS, MARKET OPPORTUNITIES. PRODUCTS AND CHANNELS BALANCE SALES

NEW PARTNERSHIPS IN LICENSING

• 2 iconic Italian brands for women
• 2 segments (premium and contemporary)

• 2 strong optical offers

• a global, strong brand with an eyewear collection for all

• a strong commitment on sustainable materials

• a strong optical offer

• a new eyewear brand for men with global ambitions

• a strong digital and social dimension to leverage on

• a strong player in the fast-growing Sports & Lifestyle segment

• an iconic sports brand in North America with global potential

GROWTH

FOCUS ON CORE BRANDS, MARKET OPPORTUNITIES. PRODUCTS AND CHANNELS BALANCE SALES

AT THE FOREFRONT OF PRODUCT DEVELOPMENT AND INNOVATION

NEW EYEWEAR COLLECTIONS DEVELOPED WITH SUSTAINABLE RAW MATERIALS

1. REGENERATED NYLON 100% Regenerated Nylon obtained recycling waste rescued from landfills and oceans

2. BIO-BASED MATERIALS From 44% to 58% bio-based sourced from castor oil

ECONYL® regenerated nylon is a product that can help you close the loop and deliver sustainable products. Made from waste, it's infinitely recyclable and can unleash infinite possibilities for makers, creators and consumers.

eyewear is fully part of the project, offering plastic sunglasses and optical frames at least 40% bio-based from renewable resources

for a modern and successful customer-centric and consumer-oriented business model

MARGINS EXPANSION

• Industrial footprint

• Cost Productivity plan

NEW INDUSTRIAL PLAN & ONGOING COSTS OPTIMIZATION TO ENABLE ECONOMIC & FINANCIAL SOLIDITY AND ONGOING RECOVERY OF HIGHER MARGINS

MARGINS EXPANSION

NEW INDUSTRIAL PLAN

TO ENABLE GROUP ECONOMIC AND FINANCIAL SOLIDITY

REALIGN INDUSTRIAL FOOTPRINT TO THE NEW PRODUCTION SCENARIO SAFILO WILL BE FACING

Italian production volumes will approximately halve over the next 2 years due to the exit of LVMH licenses

• KEY ACTIONS Downsizing of Longarone and Padua HQ
• Closure of Martignacco starting from Jan 2020

KEY IMPLICATIONS ~700 expected redundancies in Italy

The plan under discussion with the trade unions and workers' representatives, foresees the activation of available social tools for restructuring, with the aim of minimizing the social impact

MARGINS EXPANSION

ONGOING COSTS OPTIMIZATION

TO CONTINUE RECOVERING HIGHER MARGINS

CONTINUE COST PRODUCTIVITY PLAN TO INCREASE COGS AND OPEX EFFICIENCIES

• Rationalization of suppliers/new sourcing geographies
• Simplification of components and materials COGS
• Efficiencies in plants fixed costs
• Reduction of lead times
• Improvement of forecast accuracy

• Completion of Eyeway roadmap

• Clean-up of inventory

• General expenses

• HQ and Global functions

OVERHEADS

SAVING TARGETS (2020-2024 in Euro million)

TODAY AGENDA

An Attractive Eyewear Industry

Safilo 2018-2019 Achievements

Our Roadmap to 2024

FINANCIAL TARGETS

FINANCIAL PLAN 2020 – 2024

(in Euro and % on sales - at constant 2019 exchange rates)

* 2018A and 2019E, excluding the Retail Operations sold on July 1, 2019

** 2020-2024 targets, including Blenders Eyewear acquisition

¹ EBITDA MARGIN Adjusted, excluding non-recurring and extraordinary costs

² 2018 adjusted EBITDA MARGIN, also excluding the €39M Kering accounting compensation

³The application of IFRS 16 increases the EBITDA margin by approximately +1% compared to the reporting pre-IFRS 16, while it is substantially neutral at the EBIT level

FINANCIAL PLAN 2020 – 2024

(at constant 2019 exchange rates, pre-IFRS 16)

		BUSINESS DRIVERS & ENABLERS		5Y SALES CAGR	5Y ∆ EBITDA1
Sales drivers	Brands & Products	• Carrera, Polaroid, Smith • Licenses • Optical business	5YR organic sales CAGRs Mid-to High single Low-to-Mid single Mid-single		(Euro million)
	Markets & Channels	• North America • Europe • Emerging • E-Commerce	Mid-single Low-single High-single Double digits	+1%/2%	-20 / Flat
	Acquisition	• Blenders Eyewear	Double digits
	LVMH Exit	• Dior, Fendi, Givenchy		( €200 M and double digit margin)
COGS Cost structure		• Realize COGS savings			+25
	Overheads	• Streamline Overheads			+20
		TOTAL IMPACT			+25 /+50

Q&A

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