Essilor - 2009 Financial Results
By Essilor, PRNEWednesday, March 3, 2010
CHARENTON-LE-PONT, France, March 4, 2010 -
- A Remarkable Year in the Context of 2009
- Revenue up 6.3%
- Contribution Margin at a Record High of 18.2%
- Restated EPS up 10% to EUR2.03
- Free Cash Flow up 25% to EUR390 Million
- Recommended Dividend of EUR0.70 per Share, up 6.1%
At its meeting yesterday, the Board of Directors of Essilor
approved the financial statements for the year ended December 31, 2009. The
financial statements have been audited and the auditors are in the process of
issuing an unqualified opinion.
EUR millions 2009 2008 % Change
Revenue 3,268 3,074.4 + 6.3%
Contribution from operations(1) 594.4 551.2 + 7.9%
As a % of revenue 18.2% 17.9% -
Profit attributable to equity holders 394.0 382.4 + 3.1%
Restated earnings per share(2) (EUR) 2.03 1.85 + 10.0%
Reported earnings per share(EUR) 1.91 1.85 +3.2%
Free cash flow(3) 390 313 + 24.6%
(1) Operating profit before compensation costs of share-based
payments, restructuring costs, other income and expense, and
goodwill impairment.
(2) Restated for the EUR26.1 million provision in 2009 in respect of
various risks and tax litigations
(3) Net cash from operating activities less purchases of property,
plant and equipment and intangible assets, according to the IFRS
consolidated cash flow statement.
In a recessionary economy, 2009 saw an unprecedented slowdown
in the ophthalmic optical market. In this context, Essilor was able to
demonstrate the solidity of its growth model and continued to progress in the
market by leveraging its innovative products and efficient distribution
networks and by stepping up its acquisition strategy.
The year's highlights included:
- Successful new products, including the new Crizal(R) anti-reflective
lens, Xperio(TM) polarizing lens, personalized lenses incorporating
eyecode(TM) technology and the Mr Blue(R) edger.
- Faster deployment in the mid-range, thanks to a dedicated local
offering.
- Entry of 27 new companies into the Company in all regions.
- Pursuit of productivity gains and operational efficiency.
Dividend
Based on its confidence in the Company's outlook, the Board of
Directors will recommend that shareholders at the Annual Meeting on May 11,
2010 approve the payment of a 2009 dividend of EUR0.70 per share,
representing a 6.1% increase over the 2008 dividend. The payout ratio
increased to 37%. The dividend will be payable as from May 28, 2010.
Outlook
In 2010, the economic environment is expected to be more
favourable than in 2009, with a progressive recovery in global activity. The
ophthalmic optical market enjoys positive trends, linked to the ageing of the
population, the potential of high value-added products and the rise of a
middle-class in emerging countries. Backed by the robustness of its business
model, demonstrated in 2009, Essilor will step up its strategy of market
share gains. 2010 will therefore be a major year for new product launches,
geographic expansion and the acceleration of bolt-on acquisitions. Essilor
expects a gradual improvement in its revenue and will continue to pursue
operational efficiency gains.
Analyst Meeting
A meeting with financial analysts will be held today, March 4, at 10:30
a.m. CET. It will be webcast live in French at
hosting.3sens.com/Essilor/20100304-47FAFD92/fr/ and in English at
hosting.3sens.com/Essilor/20100304-47FAFD92/en/.
Forthcoming investor events
First-quarter 2010 report: April 23, 2010
Annual Shareholders' Meeting: May 11, 2010
The world leader in ophthalmic optical products, Essilor International
researches, develops, manufactures and markets around the world a wide
range of lenses to correct myopia, hyperopia, presbyopia and astigmatism.
Its flagship brands are Varilux(R), Crizal(R), Essilor(R), Definity(R) and
Xperio(TM). Based in France, the company reported consolidated revenue of
EUR3.2 billion in 2009, with 34,700 employees and operations in 100
countries.
For more information, please visit www.essilor.com.
The Essilor share trades on the NYSE Euronext Paris market and is included
in the CAC 40 index. Codes and symbols: ISIN: FR FR0000121667; Reuters:
ESSI.PA; Bloomberg: EI:FP.
REVENUE UP 5% AT CONSTANT EXCHANGE RATES
Revenue 2009 2008 % Change % Change
EUR millions (reported) (like-for-like)
Europe 1,331.7 1,356.3 - 1.8% - 2.7%
North America 1,354.0 1,253.0 + 8.1% - 0.4%
Asia-Pacific 344.7 301.8 + 14.2% + 12.3%
Latin America 134.0 127.2 + 5.3% + 7.0%
Laboratory 103.6 36.1 + 186.9% - 7.0%
equipment
Total 3,268.0 3,074.4 6.3% 0.1%
Consolidated revenue rose 6.3% to EUR3,268 million in 2009.
- On a like-for-like basis, revenue grew by 0.1%, reflecting stable
Lens revenue and a 2.3% increase in Instrument revenue.
- Consolidation of companies acquired in 2008 and 2009 accounted for 4.9%
of reported growth, of which 2.3% from Satisloh.
- The 1.3% positive currency effect was mainly due to the rise in the
dollar and, to a lesser extent, the yen against the euro, which
offset the negative impact on revenue of the weaker British pound,
Brazilian real and Canadian dollar.
Geographically, unit sales edged back slightly in mature
countries but rose sharply in emerging markets:
- Revenue in Europe declined by 2.7% in a challenging environment.
During the year, Essilor stepped up deployment of its multi-network
strategy, which allows it to capture the strong demand for
entry-level products while continuing to pursue its innovation
strategy. Operations in France, Germany and Italy, as well as the
Instruments Division, held up particularly well, with operations
in Russia and Finland reporting the strongest performances.
- Revenue was virtually unchanged in North America (down 0.4%). In
the United States, firm sales to eyecare professionals and independent
laboratories offset difficulties encountered with certain optical
chains. Revenue in Canada was hurt by a fall-off in unit sales.
- In Asia, where revenue rose 12.3% overall during the year, performance
was satisfactory in every country except Japan. Growth was
led in India, China and South Korea by sales of specialty lenses and
other new products, and lifted in Australia by strong demand for the
Varilux and Crizal lines. Revenue also saw sustained growth in South
Africa.
- After enjoying very strong growth in 2008, revenue in Latin America
rose a solid 7% in 2009 despite the economic slowdown. The sharp
increase in anti-reflective lens sales in Brazil and especially Mexico
helped to improve the product mix.
- Lastly, in a particularly challenging year for the capital equipment
industry, Satisloh held the decline in sales to around 7%, thereby
enabling the company to increase its market share. Surfacing machine
sales remained strong during the year.
Fourth quarter: continued recovery in growth
Revenue Q4 2009 Q4 2008 % Change % Change
EUR millions (reported) (like-for-like)
Europe 342.3 338.9 + 1.0% - 0.7%
North America 302.4 319.3 - 5.3% + 1.1%
Asia-Pacific 85.0 75.7 + 12.3% + 11.2%
Latin America 38.1 28.7 + 33.0% + 15.1%
Laboratory 31.6 34.0 - 7.1% - 7.1%
equipment
Total 799.4 796.6 +0.4% + 1.5%
Consolidated revenue for the fourth quarter alone stood at
EUR799.4 million, up 0.4% year-on-year as reported and 1.5% like-for-like.
With Satisloh now contributing to organic growth, the contribution from
acquisitions declined to 2.3% for the period. Lastly, for the first time in
2009, the currency effect turned negative (at 3.4%), primarily due to the
appreciation of the euro against the US dollar.
Business conditions improved in every operating region during
the quarter:
- Business stabilized in Europe.
- Demand turned up noticeably in North America and significantly in
Latin America.
- Growth remained strong in Asia.
- The Laboratory Equipment business recovered.
Six new prescription laboratories were acquired in Europe, the
United States, India and South Africa, along with a distributor in Brazil,
for total additional full-year revenue of EUR23 million.
CONTRIBUTION MARGIN AT 18.2%
EUR millions 2009 2008
Gross margin 1,832.6 1,749.3
As a % of revenue 56.1 56.9
Operating expenses 1,238.2 1,198.2
Contribution from operations(1) 594.4 551.2
As a % of revenue 18.2 17.9
(1) Operating profit before compensation costs of share-based
payments, restructuring costs, other income and expense, and
goodwill impairment.
The contribution from operations increased 7.9% to EUR594.4
million in 2009, while the contribution margin improved by 0.3 points to
18.2%, despite the dilutive impact of consolidating Satisloh. The growth may
be analyzed as follows:
- Gross margin declined by 0.8 points to 56.1% of revenue, due to the
dilutive impact from Satisloh and other acquisitions. Excluding the
impact of these acquisitions, gross margin was unchanged for the year.
- Operating expenses as a percentage of revenue declined by 1.1 point,
to 37.9%, thanks to i) tight control over selling and distribution
costs (EUR706.6 million) and major reductions in overheads while
maintaining a strong research and development commitment (funded at
EUR151.2 million before deduction of a EUR10.4 million research tax
credit) and ii) the positive impact of acquisitions whose operating
expense/revenue ratio is lower than the Company average.
RESTATED EPS UP 10%
Profit attributable to equity holders of the parent up 3.1%
Profit attributable to equity holders rose by 3.1% to end the
year at EUR394 million, it represented 12.1% of revenue, close to the level
of 2008. It may be analyzed as follows:
- Other income and expenses from operations amounted to a net expense of
EUR39.2 million, comprising EUR21.9 million in compensation costs of
share-based payments and EUR17.3 million in restructuring costs,
charges to provisions for contingencies, claims and litigation, and
other expenses.
- Operating profit increased 7.9% to EUR555.2 million for the year.
- Finance costs and other financial income and expenses represented a
net expense of EUR11.2 million compared with EUR2.5 million in 2008,
reflecting the increase in net finance costs due to the higher average
net debt for the year and, to a lesser extent, a decline in creditor
interest income.
- Share of profits of associates remained unchanged at EUR26 million, as
higher earnings at Transitions (49%-owned) offset a decline at Sperian
Protection (15%-owned).
Income tax amounted to EUR168.2 million, including a EUR26.1
million provision in respect of the various tax controls and litigations
underway for the Company. Excluding this non-recurring item, the effective
tax rate was 26.1%. The improvement was primarily led by a decline in the tax
rate in Brazil and the faster earnings growth in regions with more favorable
tax regimes.
Earnings per share rose 3.2% to EUR1.9. Restated earnings per
share rose by 10 % to EUR2.03.
FREE CASH FLOW UP 25%
Essilor's business model continued to demonstrate its ability
to generate strong cash flow in 2009. Operating cash flow amounted to EUR515
million, providing ample funds to finance the company's growth, by covering:
- The EUR71 million rise in working capital requirement due to an
increase in trade receivables.
- EUR125 million in gross capital expenditure, representing 3.8% of
revenue.
This left free cash flow[1] up 24.6% to EUR390 million.
This good cash flow performance also enabled Essilor to
continue deploying its acquisitions and partnership strategy around the world
(EUR161 million invested, net of acquired cash); pursue its share buyback
programs (EUR76.1 million) and increase the dividend (EUR136 million).
Change in net debt
EUR millions
Operating cash flow (before 586 Purchases of property, 125
WCR) plant and equipment
Conversions of OCEANE 153 Change in WCR 71
convertible bonds and other
Issue of share capital 37 Dividends 139
Other 2 Financial investments 161
net of the proceeds
from disposals
Share buybacks 76
Decrease in debt 206
A STRONG BALANCE SHEET
Net cash position
The growth in earnings and cash flow helped to further
strengthen an already very solid balance sheet. At December 31, 2009, the
Company had net cash of EUR92.8 million, equivalent to 3.4% of consolidated
equity.
Goodwill
Goodwill increased by EUR102 million in 2009, to stand at
EUR1,060 million at year-end, or 25% of total assets.
Inventories
Inventories amounted to EUR486 million at December 31, 2009,
an increase of EUR10 million or 1% like-for-like.
In all, the balance sheet structure was strengthened, with an
equity to assets ratio of 65.2%.
ACQUISITIONS IN 2009
Essilor actively pursued its acquisitions strategy in 2009,
purchasing interests in 27 companies during the year, mainly prescription
lens laboratories or distributors. The strategy was deployed in every region,
with 13 acquisitions in North America, five in Europe, six in Asia-Pacific,
one in the Middle East, one in South Africa and one in Brazil.
SUBSEQUENT EVENTS
Since the beginning of 2010, Essilor has continued to expand
in the global marketplace with new partnerships. In China, a majority
interest was acquired in Danyang ILT, an ophthalmic lens manufacturer, while
a prescription lens laboratory was purchased in Abu Dhabi. In Australia,
Essilor acquired a 70% interest in Eyebiz Pty Limited, Luxottica's
Sydney-based optical lens finishing laboratory that supplies Luxottica's
retail optical outlets in Australia and New Zealand.
In December 2009, Essilor agreed to acquire FXG International, the
leading designer and marketer of non-prescription eyewear in the United
States, with revenue of $259 million in 2009. The transaction, which is
subject to regulatory approvals and the affirmative vote of a majority of
FGX's shareholders, is expected to close in March. It will enable Essilor to
enter a new growth market.
---------------------------------
[1] Net cash from operating activities less purchases of property,
plant and equipment and intangible assets, according to the IFRS
consolidated cash flow statement.
------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2009
CONSOLIDATED INCOME STATEMENT
EUR thousands, except per share data 2009 2008
Revenue 3,267,978 3,074,419
Cost of sales (1,435,333) (1,325,106)
GROSS MARGIN 1,832,645 1,749,313
Research and development costs (151,221) (144,518)
Selling and distribution costs (706,619) (672,268)
Other operating expenses (380,367) (381,368)
CONTRIBUTION FROM OPERATIONS 594,438 551,159
Restructuring costs, net (11,383) (3,736)
Impairment losses 0 0
Compensation costs on share-based payments (21,865) (24,906)
Other income from operations, net 2,456 1,926
Other expenses from operations, net (7,128) (9,284)
Gains and losses on asset disposals, net (1,303) (629)
OPERATING PROFIT 555,215 514,530
Finance costs (31,498) (28,181)
Income from cash and cash equivalents 18,739 29,042
Other financial income, net 41,551 43,349
Other financial expenses, net (39,946) (46,716)
Share of profit of associates 25,974 26,053
PROFIT BEFORE TAX 570,035 538,077
Income tax expense (168,169) (149,266)
NET PROFIT 401,866 388,811
Attributable to equity holders of Essilor 394,036 382,356
International
Attributable to minority interests 7,830 6,455
Basic earnings per common share (EUR) 1.91 1.85
Weighted average number of common shares
(thousands) 206,691 206,875
Diluted earnings per common share (EUR) 1.89 1.81
Diluted weighted average number of common
shares (thousands) 210,557 213,615
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2009
ASSETS
EUR thousands December 31, December 31,
2009 2008
Goodwill 1,059,941 957,605
Other intangible assets 221,688 205,249
Property, plant and equipment 803,022 811,484
INTANGIBLE ASSETS AND PROPERTY, PLANT AND 2,084,651 1,974,338
EQUIPMENT, NET
Investments in associates 180,034 164,690
Other long-term financial investments 73,920 44,214
Deferred tax assets 57,229 51,955
Non-current receivables 10,570 8,093
Other non-current assets 854 693
OTHER NON-CURRENT ASSETS, NET 322,607 269,645
TOTAL NON-CURRENT ASSETS, NET 2,407,258 2,243,983
Inventories 485,606 475,299
Prepayments to suppliers 12,373 9,521
Current trade receivables 746,266 684,797
Current income tax assets 17,039 5,859
Other receivables 18,434 37,294
Derivative financial instruments 40,485 50,996
Prepaid expenses 20,765 21,242
Marketable securities 33,965 32,538
Cash and cash equivalents 385,548 505,571
CURRENT ASSETS, NET 1,760,481 1,823,117
TOTAL ASSETS 4,167,739 4,067,100
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2009
EQUITY AND LIABILITIES
EUR thousands December 31, December 31,
2009 2008
Share capital 38,792 37,984
Additional paid-in capital 415,321 311,765
Retained earnings 2,107,571 1,829,870
Treasury stock (174,580) (153,407)
Convertible bond (OCEANE) call option 6,854 22,206
Revalution and others reserves (21,653) (9,109)
Translation reserve (50,194) (70,235)
Net profit attributable to equity
holders of Essilor International 394,036 382,356
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF ESSILOR INTERNATIONAL 2,716,147 2,351,430
Minority interests 21,786 14,544
TOTAL EQUITY 2,737,933 2,365,974
Provisions for pensions and other
post-employment obligations 131,316 132,401
Long-term borrowings 282,222 437,617
Deferred tax liabilities 24,678 22,406
Long-term payables 2,393 2,359
NON-CURRENT LIABILITIES 440,609 594,783
Provisions 68,887 36,720
Short-term borrowings 82,929 212,835
Customer prepayments 2,866 8,611
Short-term payables 624,184 631,945
Current income tax liability 46,507 35,626
Other liabilities 144,289 143,159
Derivative financial instruments 10,897 28,480
Deferred income 8,638 8,967
CURRENT LIABILITIES 989,197 1,106,343
TOTAL EQUITY AND LIABILITES 4,167,739 4,067,100
CONSOLIDATED CASH FLOW STATEMENT
EUR thousands 2009 2008
NET PROFIT 401,866 388,811
Share of profits of associates, net of dividends
received 19,504 20,637
Depreciation, amortization and other non-cash items 143,400 148,886
Profit before non-cash items and share of profits
of associates, net of dividends received 564,770 558,334
Provision charges (reversals) 19,724 9,810
(Gains) and losses on asset disposals, net 1,303 629
Cash flow after income tax expense and finance
costs, net 585,797 568,773
Finance costs, net 13,027 (692)
Income tax expense (current and deferred taxes) 168,169 149,266
Cash flow before income tax expense and finance 766,993 717,347
costs, net
Income taxes paid (172,226) (144,650)
Interest (paid) and received, net (8,773) 8,607
Change in working capital (70,656) (84,503)
NET CASH FROM OPERATING ACTIVITIES 515,338 496,801
Intangibles assets and purchases of property,
plant and equipment (125,275) (184,298)
Acquisitions of subsidiaries, net of the cash
acquired (128,634) (452,879)
Purchases of available-for-sale financial assets (24,263) (4,673)
Purchases of other long-term financial investments (8,071) (11,978)
Proceeds from the sale of subsidiaries, net of
cash sold 0 0
Proceeds from the sale of other non-current assets 8,889 3,799
NET CASH USED IN INVESTING ACTIVITIES (277,354) (650,029)
Proceeds from issue of share capital 37,085 31,385
(Purchases) and sales of treasury stock, net (76,096) (112,613)
Dividends paid to:
- Equity holders of Essilor International (136,189) (128,393)
- Minority shareholders of subsidiaries (2,922) (188)
Repayments of borrowings other than finance lease
liabilities (185,931) 177,782
Purchases of marketable securities (1,427) (1,359)
Repayments of finance lease liabilities (2,521) (2,644)
Other movements (536) 473
NET CASH USED IN FINANCING ACTIVITES (368,537) (35,557)
NET(DECREASE)-INCREASE IN CASH AND CASH
EQUIVALENTS (130,553) (188,785)
Cash and cash equivalents at January 1 486,765 677,164
Effect of changes in exchange rates 7,690 (1,614)
CASH AND CASH EQUIVALENTS AT DECEMBER 31 363,902 486,765
Cash and cash equivalents 385,548 505,571
Short-term bank loans and overdrafts (21,646) (18,806)
Investor Relations and Financial Communications
Veronique Gillet - Sebastien Leroy
Phone: +33(0)1-49-77-42-16
www.essilor.com
Investor Relations and Financial Communications, Veronique Gillet - Sebastien Leroy, Phone: +33(0)1-49-77-42-16
Tags: Charenton-le-pont, Essilor, France, March 4
