PADOVA, Italy—The board of directors of Safilo Group S.p.A. (SFLG.MI) approved the company’s consolidated financial statements for the year ended Dec. 31, 2016. Safilo’s full year total net sales reached €1,252.9 million, slightly contracting compared to the €1,279.0 million recorded in 2015 (a dip of 2.0 percent at current exchange rates and of 1.2 percent at constant exchange rates), which the company said was mainly as a result of the double-digit decline of Gucci in its last year as one of Safilo’s licensed brands.

Sales of the Group’s Going Forward Brands increased 3.6 percent at constant exchange rates, or 5.2 percent, excluding the decline in its U.S. retail business, while achieving solid results in the core European and North American wholesale markets while Asia remained subdued, the company noted.

The board also decided not to propose the payment of a dividend to the next annual general meeting.

At the operating level, Safilo Group’s 2016 adjusted EBITDA reached €88.8 million, declining 13.3 percent compared to €102.4 million in 2015. 2016 adjusted EBITDA margin stood at 7.1 percent of sales compared to 8.0 percent the year before, reflecting the dilutive effects of the Gucci business.

Safilo closed 2016 with an adjusted group net result of €15.4 million compared to the adjusted net result of €6.9 million recorded in 2015. 2016 adjusted net result does not include a non-cash impairment loss of €150.0 million on goodwill allocated to the Far East cash generating unit and non-recurring restructuring costs of €7.5 million.

In 2016, the group generated free cash flow of €44.7 million, further reducing the group net debt to € 48.4 million from €89.9 million in 2015 and the adjusted financial leverage to 0.5x.

This result includes the second of the three compensation payments of €30 million from Kering received in December 2016, and a cash consideration of €10.7 million for the sale of the group’s former North American distribution center in New Jersey.

Luisa Delgado, Safilo Group CEO, commented, “2016 was for Safilo a year in which we grew the sales and profitability of the Going Forward Brands Portfolio, managed the Gucci decline as well as possible in its final license period, and implemented further savings and business transformation initiatives.

“In total, the group delivered almost stable net sales at constant exchange rates and lower operating results. Going Forward margins grew, while the Gucci decline affected sales and profit. Cash flow was positive even with accelerated Capex investments.”

She added, “Our Going Forward wholesale business saw a solid performance in Europe and a positive growth in North America in a difficult U.S. retail environment, which contributed to a weak Solstice retail performance. Strong growth came from Central and Eastern Europe, IMEA, Brazil and Mexico.

“Own Core Brands did not yet perform at their potential. Smith, our biggest, had a positive year and delivered North American market leadership in snow, grew its on-line business now totaling nearly 20 percent of its North American sales, and progressed its EMEA sports expansion. Polaroid completed its supply chain and distribution integration into Safilo, delivered a positive sun season in Europe but suffered at the end of the year in some heavy promotional environments. Carrera declined in total, even though a lot of effort was put in by its management which should improve the future development.”

Delgado said, “We continued to build our License Brand portfolio, launching Givenchy, the collaboration with Swatch, and the ‘havaianas’ brand first in Brazil. We renewed early Jimmy Choo, Max Mara and Dior, while Celine will exit at the end of 2017. We signed new licenses in the fashion luxury segment with Moschino, and Love Moschino, and in the upper
contemporary segment with the American brand ‘rag & bone.’”

She noted, “In the context of the continued investment in operational improvements, 2017 has started with further SAP “go-lives” as part of our Eye-Way program. We encountered significant challenges on the IT transition of the automated Padova DC Warehouse Management. Those are impacting our 2017 Q1 Going Forward Portfolio warehouse deliveries, by an estimated 15 percent to 20 percent, compared to Q1 2016 Going Forward Portfolio sales, and [will have] resulting impact on the Group’s Q1
financial results.

“The Group is aiming to quickly achieve the capacity and speed levels required to recover the warehouse deliveries during Q2. I would like to thank our customers for the patience and trust they are showing us during these months,” Delgado said.