Safilo Group — Investor Presentation 2019

Aug 2, 2019

H1 2019 RESULTS

August 2, 2019

DISCLAIMER

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.

• 1 July, 2019: closing of the transaction to sell Solstice retail operations
• Discontinued operations resulted in a H1 2019 loss of Euro 26.2 million:
  • Euro 17.0 million for the assets disposal
  • Euro 9.2 million for the net result of the period
• Group results and comments are provided for the Continuing Operations, excluding the discontinued retail operations

ECONOMIC HIGHLIGHTS OF THE CONTINUING OPERATIONS (pre-IFRS 16)

2019 Group results are commented on a pre-IFRS 16 basis in order to support the transition and to allow proper comparison with the previous periods.

▪ The Group elected to implement IFRS 16, applying the modified retrospective approach, whereby the cumulative effect of adopting the standard has been recognized at its relevant effective date on January 1 st 2019, without the restatement of 2018 comparative information.

(Euro in millions)	CONTINUING OPERATIONS	DISCONTINUED OPERATIONS (SOLSTICE RETAIL BUSINESS)	TOTAL
Income Statement impact on H1 2019
Reduction of operating rental expenses (additional EBITDA)	7.0	5.8	12.8
Increase in depreciation expenses	(6.7)	(5.4)	(12.1)
Increase in interest expenses	(0.7)	(0.7)	(1.3)
Reduction of net result	(0.3)	(0.3)	(0.6)
Net debt impact as at June 30, 2019
Increase of lease liabilities	(35.4)	(38.0)	(73.5)

IFRS 16 impact on H1 2019 Results

HIGHLIGHTS OF THE CONTINUING OPERATIONS

in millions of Euro and % change vs same periods of 2018

Q2 2019 performance accelerates positive sales and operating profit momentum

Positive free cash flow generation and record low Group net debt

NET SALES OF THE CONTINUING OPERATIONS

in millions of Euro and % change vs same periods of 2018

Quarter on quarter top line acceleration

• Q2 net sales at Euro 248.6, +9.7%

  • ➢ +2.3% forex impact from USD appreciation
  • ➢ +7.5% revenues of wholesale business³ reflecting:
    • double-digit growth of own core brands driven by Carrera and supported by ongoing strength of Polaroid and Smith
    • Dior, Hugo Boss, Tommy Hilfiger and Max Mara standing out in the licensed portfolio
    • Travel retail and internet best business channels

• H1 net sales at Euro 495.9m, +6.5%

  • ➢ +2.6% forex impact from USD appreciation
  • ➢ +4.1% revenues of wholesale business³
  • ➢ Flattish production agreement

NET SALES OF THE CONTINUING OPERATIONS BY GEOGRAPHY

in millions of Euro and % change vs same periods of 2018

Sales in Europe consolidating positive Q1 trends

• Q2 2019 at Euro 121.7m, +4.5%/ 4.8% @cFX
  • ➢ -0.3% forex effect
  • ➢ Significant broad-based sales recovery in sunglasses after weak Q2 2018
  • ➢ Strong performance of Polaroid, in particular in Spain and Italy behind key, locally relevant brand building

2019 H1 BEST PRACTICES

Glocal approach, digital strategies, focused investments in key geographies

S a r a C a r b o n e r o B r a n d A m b a s s a d o r S p a n i s h J o u r n a l i s t 2 . 5 M f o l l o w e r s

TURKEY BRAND AMBASSADORS

N e s l i h a n a A t a g u l D o g u l u T u r k i s h a c t r e s s , 7 . 8 M f o l l o w e r s

K a d i r D o g u l u T u r k i s h a c t o r , 2 . 8 M f o l l o w e r s

RUSSIA MUSIC ACTIVATION

I v a n D o r n B r a n d A m b a s s a d o r R u s s i a n s i n g e r 0 . 7 M F o l l o w e r s

B r i t i s h d a t i n g r e a l i t y s h o w b r o a d c a s t e d o n i T V f r o m J u n e

GTR DUFRY EXCLUSIVE SKU

2019 H1 BEST PRACTICES

E n d o r s e m e n t s o f l o c a l c e l e b r i t i e s , w i t h h i g h s o c i a l e x p o s u r e , w h i c h a r e r e l e v a n t b o t h f o r c o n s u m e r s a n d c u s t o m e r s , t o c r e a t e c o n t e n t s , b u i l d b r a n d a w a r e n e s s a n d s u p p o r t b u s i n e s s d e v e l o p m e n t

GLOBAL TRAVEL RETAIL - BARCELONA EL PRAT AIRPORT I Q2

S P A I N

360 ° a c t i v a t i o n t o c r e a t e a u n i q u e P o l a r o i d e c h o i n s i d e the a i r p o r t , i n c l u d i n g : huge l e d w a l l s w i t h b r a n d v i d e o , p r o m o t i o n a l a r e a , c o m m u n i c a t i o n o f the e x c l u s i v e s k u .

NET SALES OF THE CONTINUING OPERATIONS BY GEOGRAPHY

in millions of Euro and % change vs same periods of 2018

Sales in North America showing first signs of turnaround

• Q2 2019 at Euro 80.6m, +8.4%/ +2.7% @cFX
  • ➢ +5.7% forex effect
  • ➢ Strong performance of Smith and business in Canada boosted by Hugo Boss and Kate Spade
  • ➢ Positive underlying sales trends in US supported by more business in chains and improving trading in department stores and the independent opticians' channel
  • ➢ Carrera and Tommy Hilfiger outperforming in the contemporary segment, and rag&bone picking up

Consumer event

Glocal approach, digital strategies, focused investments in key geographies

NET SALES OF THE CONTINUING OPERATIONS BY GEOGRAPHY

in millions of Euro and % change vs same periods of 2018

Sales in Asia Pacific confirming strong double-digit momentum

• Q2 2019 at Euro 25.7m, +41.6%/ +36.2% @cFX
  • ➢ +5.4% forex effect
  • ➢ Strong business trends continuing in the travel retail channel and positive performance of Greater China
  • ➢ Ongoing growth of Smith and Marc Jacobs in Australia

NET SALES OF THE CONTINUING OPERATIONS BY GEOGRAPHY

in millions of Euro and % change vs same periods of 2018

Sales in the Rest of World back to a slight growth in H1

• Q2 2019 at Euro 20.6m, +16.2%/ +14.0% @cFX
  • ➢ +2.2% forex effect
  • ➢ Broad based business recovery in Brazil and Mexico
  • ➢ Carrera, Hugo Boss and Tommy Hilfiger top performers

GROSS PROFIT PERFORMANCE OF CONTINUING OPERATIONS

in millions of Euro, % change vs same periods of 2018 and % on sales

Continuing positive industrial performance supported by volumes

• ➢ Gross margin +240 bps thanks to higher plant efficiencies and positive sales mix

• ➢ -30 bps forex impact

• H1 gross profit of Euro 266.2m, +11.0%

  • ➢ Gross margin +220 bps
  • ➢ -20 bps forex impact

• H1 2019 non-recurring items of the Continuing Operations, excluded from the Group adjusted results, equaled Euro 255.4 million:
  • ➢ Non-cash impairment of Euro 227.1 million, removing the entire goodwill allocated to the Group's CGUs
  • ➢ Non-cash write-down of deferred tax assets of Euro 23.3 million
  • ➢ Non-recurring costs of Euro 5.0 million mainly related to restructuring expenses due to cost saving projects

ADJUSTED¹ EBITDA OF THE CONTINUING OPERATIONS

in millions of Euro, % change vs same periods of 2018 and % on sales

Progress in overheads cost savings supporting recovery of operating performance

Positive sales dynamics and COGS/OPEX efficiencies exceeded the income of Euro 9.8/19.5 million booked in Q2/H1 2018 for Gucci accounting compensation

• Q2 2019 adjusted¹ EBITDA of Euro 17.7m, +25.0%

  • ➢ Significant improvement at the Opex level mainly thanks to overheads cost savings
  • ➢ higher marketing investments in own core brands

• H1 2019 adjusted¹ EBITDA of Euro 34.2m, +12.9%

  • ➢ ca. Euro 9 million overheads cost savings

ADJUSTED¹ NET RESULT OF THE CONTINUING OPERATIONS

in millions of Euro and % on sales

Back to a positive net result

▪ H1 2019 adjusted¹ net profit of Euro 8.7m :

• ➢ Stable D&A
• ➢ -40.8% net interest expenses to Euro 2.5 million due to the significantly lower average debt
• ➢ Flattish exchange rate differences

Pre-IFRS 16 adjusted¹ net result

FINANCIAL HIGHLIGHTS OF THE TOTAL OPERATIONS (pre-IFRS 16)

FREE CASH FLOW

in millions of Euro

Back to a positive Free Cash Flow generation

▪ H1 2019 Free Cash Flow of Euro 10.4 million:

• ➢ significant improvement of the underlying economic performance
• ➢ favorable working capital dynamics
• ➢ Investments of Euro 15.8 million in product supply and roll-out of new IT

Pre-IFRS 16 Free Cash Flow

19

GROUP NET DEBT AND TOTAL SHAREHOLDERS' EQUITY

Record low Group net debt and financial leverage

▪ Group net debt of Euro 3.9 million

• ➢ remaining proceeds of Euro 17.7 million from the share capital increase executed in 2018
• ➢ free cash flow of Euro 10.4 million
• ➢ Adjusted¹ Financial leverage at 0.1x

AMONG THE MOST FEATURED EYEWEAR WORLDWIDE

Appendices

¹In H1 2019, the adjusted economic results of the Continuing Operations exclude: (i) the impairment of the entire goodwill allocated to the Group's cash generating units for Euro 227.1 million, (ii) non-recurring costs for Euro 5 million (Euro 3.8 million in Q2 2019) due to restructuring expenses related to the ongoing cost saving program, and (iii) a write-down of deferred tax assets of Euro 23.3 million.

In H1 2018, the adjusted economic results excluded non-recurring costs for Euro 3.5 million (Euro 1.8 million in Q2 2018), mainly related to the CEO succession plan and reorganization costs in North America.

²In H1 2019, the adjusted economic results of the Total Operations also exclude non-recurring items related to the discontinued retail operations: (i) Euro 17.0 million for the loss on disposal and (ii) non-recurring costs for Euro 1.3 million.

³The wholesale business excludes the business of the production agreement with Kering, reported within the geographical area of Europe.

millions) (Euro in	H1 2019	%	H1 2018	%	Change % reported	Change % forex at constant
Europe	246 3	49 .7%	239 9	51.5%	+2 6%	+3 0%
North America	169 5	34 2%	157 3	33 8%	+7 8%	+1 0%
Asia Pacific	43 5	8 8%	32 5	7.0%	+33 7%	+27 9%
the world Rest of	36 7	7.4%	36 0	7.7%	+2 0%	+0 8%
Total	495 9	100.0%	465 7	100.0%	+6 5%	+3 9%
millions) (Euro in	Q2 2019	%	Q2 2018	%	Change % reported	Change % forex at constant
Europe	121 7	48 9%	116 4	51 4%	5% +4	8% +4
North America	80 6	32 4%	74 3	32 8%	+8 4%	+2 7%
Asia Pacific	25 7	10 3%	18 2	8 0%	+41 6%	+36 2%
of the world Rest	20 6	8 3%	17 7	7 8%	+16 2%	+14 0%
Total	248 6	100 0%	226 6	100 0%	+9 7%	4% +7

Economic highlights of the Continuing Operations

(Euro in millions)	H1 2019 reported	H1 2019 pre-IFRS 16	H1 2018	Change % pre-IFRS 16
Net sales	495.9	495.9	465.7	+6.5%
Gross profit % on net sales	266.2 53.7%	266.2 53.7%	239.8 51.5%	+11.0%
EBITDA % on net sales	36.3 7.3%	29.2 5.9%	26.8 5.8%	+9.1%
Adjusted1 EBITDA % on net sales	41.2 8.3%	34.2 6.9%	30.3 6.5%	+12.9%
Operating result % on net sales	(218.8) -44.1%	(219.2) -44.2%	5.5 1.2%	n.s.
Adjusted1 operating result % on net sales	13.3 2.7%	12.9 2.6%	9.1 1.9%	+42.7%
Group net result % on net sales	(246.9) -49.8%	(246.7) -49.7%	(7.9) -1.7%	n.s.
Adjusted1 Group net result % on net sales	8.5 1.7%	8.7 1.8%	(4.3) -0.9%	n.s.

(Euro in millions)	Q2 2019 reported	Q2 2019 pre-IFRS 16	Q2 2018	% Change pre-IFRS 16
Net sales	248.6	248.6	226.6	+9.7%
Gross profit % on net sales	135.9 54.7%	136.0 54.7%	118.5 52.3%	+14.7%
EBITDA % on net sales	17.4 7.0%	13.8 5.6%	12.3 5.4%	+11.9%
EBITDA1 Adjusted % on net sales	21.2 8.5%	17.7 7.1%	14.1 6.2%	+25.0%

Economic highlights of the Total Operations

H1 2019 reported	H1 2019 pre-IFRS 16	H1 2018	% Change pre-IFRS 16
521.6	521.6	492.2	+6.0%
276.6 53.0%	276.6 53.0%	254.1 51.6%	+8.9%
33.0	20.2	21.7	-7.0%
39.3	26.5	25.1	+5.2%
(241.4)	(242.1)	(0.4)	n.s.
5.3	4.6	-0.1% 3.1	+44.7%
(273.2)	(272.6)	(13.9)	n.s.
-52.4% 0.6	-52.3% 1.1	-2.8% (10.4)	n.s.
	6.3% 7.5% -46.3% 1.0% 0.1%	3.9% 5.1% -46.4% 0.9% 0.2%	4.4% 5.1% 0.6% -2.1%

(Euro in millions)	Q2 2019 reported	Q2 2019 pre-IFRS 16	Q2 2018	Change % pre-IFRS 16
Net sales	263.4	263.4	241.3	+9.2%
Gross profit	140.8	140.9	126.6	+11.2%
% on net sales	53.5%	53.5%	52.5%
EBITDA	14.7	8.3	10.3	-19.8%
% on net sales	5.6%	3.1%	4.3%
EBITDA1,2 Adjusted	19.9	13.5	12.1	+11.3%
% on net sales	7.5%	5.1%	5.0%

	June 30, 2019	June 30, 2019	December 31,	Change
	reported	pre-IFRS 16	2018	pre-IFRS 16
Net working capital	257.4	257.4	251.3	6.1
Tangible and intangible fixed assets	297.7	229.1	461.6	(232.6)
Financial fixed assets	0.0	0.0	0.0	0.0
Non-current assets held for sale	0.5	0.5	0.0	0.5
Other assets / (liabilities), net	(83.4)	(87.7)	(33.7)	(53.9)
Net invested capital	472.2	399.3	679.2	(279.9)
Net financial position	(77.4)	(3.9)	(32.9)	29.0
Group Shareholders' equity	(394.8)	(395.4)	(646.3)	251.0
Non-controlling interests	(0.0)	(0.0)	0.0	(0.0)

	June 30 2019 ,	June 30 2018 ,	Change
Trade receivables	199 5	185 8	13 7
Inventories	236 1	245 2	(9 1)
Trade payables	(178 3)	(179 3)	0 1
Net working capital	257 4	251 7	5 6
% sales LTM net on	25 9%	25 7%

	H1 2019	H1 2019	H1 2018
(Euro in millions)	reported	pre-IFRS 16
Cash flow from operating activities before changes in working capital	26.5	15.0	13.4
Changes in working capital	11.4	11.2	(37.7)
Cash flow from operating activities	37.9	26.2	(24.3)
Cash flow for investment activities	(17.3)	(15.8)	(13.0)
Free Cash Flow	20.6	10.4	(37.3)

Exchange Rates

		As of		(Appreciation)/ Depreciation	Average for		(Appreciation)/ Depreciation
		June 30,	December 31,		June 30,	June 30,
Currency	Code	2019	2018	%	2019	2018	%
US Dollar	USD	1.1380	1.1450	-0.6%	1.1298	1.2104	-6.7%
Hong-Kong Dollar	HKD	8.8866	8.9675	-0.9%	8.8611	9.4863	-6.6%
Swiss Franc	CHF	1.1105	1.1269	-1.5%	1.1295	1.1698	-3.4%
Canadian Dollar	CAD	1.4893	1.5605	-4.6%	1.5069	1.5458	-2.5%
Japanese Yen	YEN	122.6000	125.8500	-2.6%	124.2836	131.6057	-5.6%
British Pound	GBP	0.8966	0.8945	0.2%	0.8736	0.8798	-0.7%
Swedish Krown	SEK	10.5633	10.2548	3.0%	10.5181	10.1508	3.6%
Australian Dollar	AUD	1.6244	1.6220	0.1%	1.6003	1.5688	2.0%
South-African Rand	ZAR	16.1218	16.4594	-2.1%	16.0434	14.8913	7.7%
Russian Ruble	RUB	71.5975	79.7153	-10.2%	73.7444	71.9601	2.5%
Brasilian Real	BRL	4.3511	4.4440	-2.1%	4.3417	4.1415	4.8%
Indian Rupee	INR	78.5240	79.7298	-1.5%	79.1240	79.4903	-0.5%
Singapore Dollar	SGD	1.5395	1.5591	-1.3%	1.5356	1.6054	-4.4%
Malaysian Ringgit	MYR	4.7082	4.7317	-0.5%	4.6545	4.7670	-2.4%
Chinese Renminbi	CNY	7.8185	7.8751	-0.7%	7.6678	7.7086	-0.5%
Korean Won	KRW	1,315.3500	1,277.9300	2.9%	1,295.1984	1,302.3752	-0.6%
Mexican Peso	MXN	21.8201	22.4921	-3.0%	21.6543	23.0850	-6.2%
Turkish Lira	TRY	6.5655	6.0588	8.4%	6.35616	4.95655	28.2%
Dirham UAE	AED	4.1793	4.205	-0.6%	4.14913	4.44502	-6.7%

	*
* From 2020