Safilo Group Q2 and First Half Financials Show Impact of COVID-19 But Recovery Starting in June

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PADUA—The board of directors of Safilo Group has reviewed and approved the financial results for the first half of 2020. While H1 2020 results were impacted by COVID-19 and the disruption of sales in April and May, Safilo Group reported that it saw an initial business recovery in June, which was more significant in Europe. Sales began to rebound in July, and the Group saw strong growth of its online business, supported by the acquisition of Blenders, which became effective on July 1. In addition, Free Cash Flow (before acquisitions) was slightly positive thanks to effective liquidity management, and the Group’s New Term Loan Facility is under finalization to provide additional liquidity, the company said.

Safilo Group’s economic and financial highlights from the first half of 2020 include:
• H1 2020 net sales at €335.6 million, a decline of 32.7 percent at constant forex (€495.9 million in H1 2019);

• Q2 2020 net sales at €114.5 million, down 53.7 percent at constant forex (€248.6 million in Q2 2019);

• Total online business doubling in H1 2020 representing 11 percent of Group net sales;

• H1 2020 adjusted EBITDA at €-28.3 million (compared to €41.2 million in H1 2019);

• Q2 2020 adjusted EBITDA at €-34.1 million (compared to €21.2 million in Q2 2019;

• H1 2020 adjusted net result was a decline of €63.7 million (versus €8.5 million in H1 2019);

• Positive Free Cash Flow of €2.5 million (before acquisitions) and Group Net Debt of €188.5 million (post-IFRS 16), substantially in line with December 2019 excluding the impact of the acquisitions;

• End June 2020 cash position €110.9 million and new Term Loan Facility under finalization subject to lending banks’ and SACE credit approval processes over the coming weeks.

Angelo Trocchia, Safilo’s CEO, said, “As we had anticipated to the market in May, our second quarter sales and economic results were heavily impacted by the massive shutdown of commercial activities across the world in April, and the very gradual and patchy reopening of stores for prescription frames and sunglasses starting to occur in May as lockdowns were eased in many countries. In these two months, this business context resulted in a sales drop of approximately 75 percent compared to the same period last year, and in an unprecedented deleveraging of costs and negative economic performance.

“In June, store traffic and conversion rates started to clearly rebound in markets like Italy, France and Germany, while the recovery of the Chinese market, which began in April, further strengthened. On the other hand, we did not experience a sales rebound yet in North America where re-openings came a bit later and were temporarily impacted by social disruptions. The growth of the U.S. market materialized for us in July. June was a meaningful month for us for several reasons. First of all, we laid down an additional milestone in our Group Business Plan, by closing the acquisition of Blenders, a digitally native brand powered by a strong e-commerce business model which goes to enrich our proprietary brands portfolio in a crucial moment for our Group’s development and for the evolution of our industry. The global pandemic has undoubtedly elevated the importance of e-commerce, as the surge of the digital commerce business has been demonstrating, continuing to grow strongly even today as stores reopen. In Safilo, we are certainly accelerating on our digital transformation projects, working to be at the forefront of seizing the opportunities of the digital business which, with the new acquisitions of Blenders and Privé Revaux, and the growth of about 31 percent recorded in the semester by Smith's ecom coupled with the sales to our 'internet pure player' customers, has doubled compared to the same period last year.”

Trocchia continued, “We also continued focusing on our licensed brand portfolio, signing a new agreement for the design, manufacture and distribution of Ports branded sunglasses and optical frames in Mainland China. China is a key strategic market in our development plans, and we think that Ports is a perfect match to have locally relevant brands, not only in terms of fit but also with distinct tastes and local consumer trends.

“While the evolution of the current pandemic and business environment remains highly uncertain, we remain strongly committed to taking all necessary actions to aggressively manage our industrial and operating expenses, identifying efficiencies across the organization and protecting our cash requirements by securing incremental liquidity.

“Throughout our long history, Safilo has successfully navigated through many different challenges and I am firmly convinced that we will emerge also from this crisis as an even stronger organization, more agile and ready to face a rapidly changing business environment.”