Essilor News Release: Solid 2017 earnings Strong fourth quarter

3/1/2018, 6:30 AM (Source: GlobeNewswire)

Solid 2017 earnings
Strong fourth quarter

PDF Version of the news release

  • Revenue: Up 6.7% at constant exchange rates, up 3.1% like-for-like
  • Robust growth in the United States and e-commerce activities
  • Adjusted contribution from operations: 18.3% of revenue
  • Healthy free cash flow generation

Charenton-le-Pont, France (March 1, 2018 - 6:30 am) - The Board of Directors of Essilor International met on February 28, 2018 to approve the financial statements for 2017. These statements have been audited and the auditors are in the process of issuing their report.

Financial Highlights

€ millions 2017
Adjusted(f)
2016
Reported
% Change 2017
Reported
Revenue 7,490 7,115 +5.3% 7,490
Contribution from operations(b)
(% of revenue)
1,367
18.3%
1,321
18.6%
+3.5%

 
1,361
18.2%
Operating profit 1,248 1,230 +1.5% 1,074
Profit attributable to equity holders
(% of revenue)
833
11.1%
813
11.4%
+2.5%

 
789
10.5%
Earnings per share (in €) 3.85 3.79 +1.6% 3.64

There are two main types of adjustment items. First, expenses associated with the proposed combination with Luxottica, and, second, the positive effects of tax changes in the United States and France. These items are non-recurring adjustments (see page 3).

"Essilor continued its mission to improve vision across the globe in 2017, and delivered another year of earnings growth. Our ambition to eradicate poor vision drives a development strategy that is supported more than ever by our powerful innovation capacity, our acquisition model and the quality of our governance, in which an increasing number of group employees are involved. The momentum created by the rollout of new products, notably in the fourth quarter, together with the numerous transformative initiatives undertaken in 2017, allow us to look ahead to 2018 with confidence.

Once completed, the combination with Luxottica will open a new chapter for us, allowing us to grow in a way that benefits consumers and the optical industry" commented Hubert Sagnières, Essilor Chairman and CEO.

In 2017, Essilor continued to provide an ever-growing number of solutions to respond to unmet visual needs by pursuing a strategy of expanding its scope of operations in sunwear and online sales.

In prescription lenses, a strategy geared to innovation, consumer marketing, partnerships and new, inclusive business models led to launches in all price ranges of a variety of products for correcting and protecting eyesight and preventing visual health risks. Custom services were also developed for a growing number of eyecare professionals, and the Company continued to expand geographically.

The rollout of Essilor's portfolio of sunwear brands continued, particularly in China, and the Company boosted its presence and organization in online retailing.

More importantly, Essilor began writing a new chapter in its history in 2017 with the announcement on January 16 of its proposed combination with Luxottica. Major strides were made during the year toward finalizing the combination. After shareholders approved the combination at the General Meeting of May 11, 2017, Essilor completed the hive-down of its activities on November 1, 2017, paving the way for it to become the holding company at the top of the combined group that will house Essilor and Luxottica. The two companies also filed notices with antitrust authorities in several jurisdictions, 13 of which have approved the deal unconditionally as of today.

Highlights of the 2017 fiscal year included:

  • A sharp acceleration in fourth quarter like-for-like revenue growth at 5.1%;
  • Good overall performance at the Lenses and Optical Instruments division, primarily reflecting accelerated growth in the United States in the second half and strong online sales. These positive trends offset weakness in some countries, particularly Australia and Brazil;
  • Global rollouts of the new Varilux® X series(TM) progressive lens, the new Crizal® Sapphire(TM) 360° anti-reflective lens and the Eye Protect System(TM) lens, which sets a new standard for protection against UV rays and harmful blue-violet light;
  • Further development of the Sunglasses & Readers division characterized by solid growth in the United States and the integration of Photosynthesis Group in China;
  • Robust growth at the Equipment division, driven by positive momentum in the optical industry and the appetite of many players for new lens manufacturing technologies;
  • The completion of nine partnerships or acquisitions representing combined full-year revenue of close to €87 million;
  • Significant free cash flow generation at €925 million that allowed Essilor to make significant progress in reducing its net debt.

Dividend
The Board of Directors will recommend that shareholders at the Annual Meeting of April 24, 2018 approve the payment of a dividend of €1.53 per share, an increase of 2% from 2016. This dividend will be paid as from April 30, 2018 (ex-date April 26, 2018).

Outlook
The solid performance in 2017 and the ongoing deployment of growth initiatives enable Essilor to target, in 2018, revenue growth of around 4% like-for-like(a) and a contribution from operations(b) greater than or equal to 18.3%(g) of revenue.
The finalization of the proposed Essilor and Luxottica combination is planned for the first part of 2018 after obtaining all necessary authorizations.

------------------------------
A conference call in English will be held today at 10:30 a.m. CET.
The meeting will be available live and may also be heard later at:
http://hosting.3sens.com/Essilor/20180301-C40B296B/en/webcast/startup.php

Forthcoming investor events
April 24, 2018: Annual Shareholder's Meeting at "La Maison de la Mutualité", Paris, France
April 27, 2018: First-quarter 2018 revenue

Notes
a - Like-for-like growth: Growth at constant scope and exchange rates. See definition provided in Note 2.3 to the consolidated financial statements of the 2016 Registration Document.
b - Contribution from operations: Revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs and other operating expenses).
c - Bolt-on acquisitions: Local acquisitions or partnerships.
d - Free cash flow: Net cash from operating activities before working capital requirement.
e - Free cash flow: Net cash from operating activities less purchases of property, plant and equipment and intangible assets, according to the IFRS consolidated cash flow statement.
f - Adjusted: There are two main types of adjustment items. First, expenses associated with the proposed combination with Luxottica, and, second, the positive effects of tax changes in the United States and France. These non-recurring adjustments cover:
- Transaction costs related to the proposed combination with Luxottica for €109 million;
- An additional cost of €45million principally linked to the lifting of performance conditions for two employee shareholding plans;
- A one-time contribution for €19 million to mission-related programs focused on eradicating poor vision worldwide;
- A gain from the refund of the 3% dividend tax in France, net of one exceptional tax, for €19 million;
- A one-time gain linked to tax reform passed in the United States in December 2017 for €73 million.
The reported accounts and a reconciliation of the reported accounts to the adjusted accounts are provided in chapter 1.6.1.

g - Excluding any new strategic acquisition.

About Essilor
The world's leading ophthalmic optics company, Essilor designs, manufactures and markets a wide range of lenses to improve and protect eyesight. Its mission is to improve lives by improving sight. To support this mission, Essilor allocates more than €200 million to research and innovation every year, in a commitment to continuously bring new, more effective products to market. Its flagship brands are Varilux®, Crizal®, Transitions®, EyezenTM, Xperio®, Foster Grant®, BolonTM and Costa®. It also develops and markets equipment, instruments and services for eyecare professionals.
Essilor reported consolidated revenue of around €7.5 billion in 2017 and employs approximately 67,000 people worldwide. It markets its products in more than 100 countries and has 34 plants, 481 prescription laboratories and edging facilities, as well as 4 research and development centers around the world. For more information, please visit www.essilor.com.
The Essilor share trades on the Euronext Paris market and is included in the Euro Stoxx 50 and CAC 40 indices. 
Codes and symbols: ISIN: FR0000121667; Reuters: ESSI.PA; Bloomberg: EI:FP.

CONTACTS

Investor Relations
Véronique Gillet - Sébastien Leroy
Ariel Bauer - Alex Kleban
Tel.: +33 (0)1 49 77 42 16
Corporate Communications
Laura Viscovich

 

Tel.: +33 (0)1 49 77 45 02
Media Relations
Maïlis Thiercelin

 

Tel.: +33 (0)1 49 77 45 02

EXCERPTS FROM THE MANAGEMENT REPORT
BY THE BOARD OF DIRECTORS - FEBRUARY 28, 2018

2017 CONSOLIDATED REVENUE

Revenue
€ millions
2017 2016 Change
(reported)
Change
(like-for-like(a))
Scope effect Currency effect
Lenses and Optical Instruments 6,498 6,218 +4.5% +3.4% +2.4% -1.3%
North America 2,805 2,707 +3.6% +4.1% +1.4% -1.9%
Europe 2,015 1,905 +5.7% +2.4% +4.0% -0.6%
Asia/Pacific/Middle East/Africa 1,192 1,138 +4.7% +5.1% +2.0% -2.3%
Latin America 486 468 +4.0% -0.9% +2.8% +2.0%
Sunglasses & Readers 766 685 +12.0% +0.1% +14.8% -3.0%
Equipment 226 212 +6.4% +5.8% +2.0% -1.4%
TOTAL 7,490 7,115 +5.3% +3.1% +3.6% -1.4%

In 2017, consolidated revenue totaled €7,490 million, an increase of 6.7% excluding currency effects.
On a like-for-like basis(a), sales increased by 3.1%, with momentum picking up between the first half (+2.5%) and second half (+3.8%).
The consolidation scope effect (+3.6%) reflected contribution from bolt-on acquisitions(c) completed primarily in 2016, but also in 2017.
More than half of the exchange rate effect (negative 1.4%) reflected the US dollar's depreciation against the euro during the year. The rest was mostly due to declines in the value of the British pound, Chinese yuan and Turkish lira, partially offset by the strengthening of the Brazilian real and Russian ruble.

REVENUE BY OPERATING SEGMENT AND BY REGION

Lenses and Optical Instruments
The Lenses & Optical Instruments division delivered like-for-like growth(a) of 3.4% in 2017 for total sales of €6,498 million.

  • North America

Like-for-like growth(a) was 4.1% in North America, which represented an improvement over prior year levels. Performance was driven primarily by Company initiatives as market conditions remained subdued throughout the year.
In the United States, the Company's core lens business gained momentum through the launch of innovative products and the ongoing deployment of strategic initiatives that allowed for enhanced customer engagement. In conjunction with the launch of the Varilux® X series(TM) lens, Essilor introduced in the latter part of the year the "Ultimate Lens Package"[1], a premium solution intended both for progressive and single-vision lens wearers. It was very well received by independent eyecare professionals and consumers alike. Strategic initiatives focused on independent eyecare professionals, including alliances (Vision Source, PERC/IVA and Optiport) and business solutions (Essilor Experts), further boosted performance. Essilor's key account business continued to experience strong demand for innovative lens offerings, including blue-light-filtering technology, as well as integrated supply chain solutions. The Company also benefited from exposure to faster growing retail groups. Contact lens distribution activities contributed to growth throughout the year.
In Canada, revenue rose slightly.

  • Europe

Like-for-like(a) revenue growth of 2.4% in Europe was fueled mainly by new products, an effective multi-network strategy and good results from the instruments and e-commerce activities.
The primary drivers of this growth included the launch during the spring of the new Varilux® X series(TM) progressive lens, which translated into sustained gains for premium and custom products, as well as strong volume growth for Transitions® photochromic lenses.
Results were mixed across different countries and distribution channels. Alongside Eastern Europe, Russia and Scandinavia, Italy was among the countries that saw the strongest growth in the region thanks to a better product mix with independent opticians. Revenue was flat in Germany, Benelux and France, where the market was affected by longer optical services reimbursement frequencies. In these countries, distribution networks like Novacel and Nika were particularly buoyant. Sales in the United Kingdom and Spain were slightly dampened by a less supportive economic environment.

  • Asia/Pacific/Middle East/Africa

In the Asia/Pacific/Middle East/Africa region, like-for-like growth(a) of 5.1% reflected robust domestic sales in fast-growing markets, partly offset by slower export growth and declining activity in Australia. In China, domestic sales rose by more than 10% driven by strong growth in mid-range product lines, lenses offering protection from harmful blue-violet light and Eyezen(TM) lenses. India delivered more mixed results in its domestic market, with buoyant sales of progressive and photochromic lenses achieved against a backdrop of monetary and fiscal upheaval. In Korea, the Company's commercial initiatives drove sales of progressive lenses and Transitions® products. Growth in Southeast Asia and Turkey was very strong, while trends in the Middle East and Africa were more mixed. Japan benefited, quarter after quarter, from an improvement in sales and product mix with independent opticians and optical chains.

  • Latin America

Revenue in Latin America was broadly flat in 2017 (-0.9% like-for-like(a)), with a sharp decline in sales in Brazil cancelling out increases in Spanish-speaking countries in the region.
Due to unfavorable economic conditions in Brazil, the country's optical industry was hit by sharply lower foot traffic in optical shops, notably impacting the premium segment. For Essilor, this translated into a decline in sales of Crizal antireflective lenses and Varilux progressive lenses, though momentum picked up for the latter in the second half of the year. The repositioning of the Transitions® photochromic lenses with a more attractive value proposition helped sustain sales volumes and enhanced the brand's presence. Under these challenging market conditions, the prescription laboratories saw a small increase in revenue.
Spanish-speaking countries, which now contribute more than half of revenue in the region, continued to post strong gains despite some setbacks. For instance, steady sales growth in Mexico throughout the first half of the year was hindered by the impact of natural disasters on local retailers and the Company's supply chain starting in September. Growth in Colombia was close to 10%, driven in part by increased sales of value-added lenses. Argentina delivered the best performance in the region, and Chile and Costa Rica both kept a healthy dynamic .

  • Instruments

A part of the Lenses and Optical Instruments division, the Instruments business markets tools for use by optometrists and opticians. It achieved like-for-like(a) revenue growth of 8.5% in 2017 thanks to strong sales momentum across all geographies and product lines.
The lens edging-mounting business saw record sales of edgers. The business was boosted by the success of entry-level and mid-range machines, particularly in fast-growing markets with the Delta 2(TM) compact edging station, and by the launch of the new Pro-E(TM) 600 edger designed for labs managing high volumes, including online sellers.  
Business was very brisk on the optometry side (refraction and diagnostic devices) thanks to new contracts for diagnostic machine sales to key accounts and the launch of a new diagnostic and refraction instrument, Wave Analyzer Cornea 700. This new instrument allows opticians to customize optical equipment thanks to comprehensive exams of the anterior chamber of the eye (measurement of visual performance by day and night, symptoms of visual fatigue, glare sensitivity, etc.).
Sales of in-store measurement instruments were also very strong, notably the measurement columns marketed by French company IVS that enable stores to offer personalized lenses.

  • E-commerce businesses

Also part of the Lenses and Optical Instruments division, the e-commerce businesses delivered like-for-like growth(a) of around 13% in 2017. Growth in North America reflected the continued success of the EyeBuyDirect(TM) business model for prescription lenses in the United States as well as a rebound in Clearly(TM) sales during the second half. In Europe, robust sales growth was recorded by Vision Direct(TM) for contact lenses and by Glasses Direct(TM) for prescription glasses. In Scandinavia, the activities of online contact lens retailers LensOn® (acquired in 2016 with MyOptique Group) and LensWay(TM) were combined during the year. The online businesses in Brazil (eÓtica and e-lens), China (Coastal Vision(TM)) and India (Coolwinks(TM)) all continued to experience rapid growth.

Sunglasses & Readers
The Sunglasses & Readers division saw like-for-like(a) sales growth of 0.1% in 2017.
In North America, revenue ended the year up slightly at FGX International. Sales to consumers measured in stores trended higher both for readers and sunglasses. FGX also renewed contracts with several major customers and enjoyed shelf space gains. Lastly, FGX's international sales were buoyant.
Costa delivered the best performance of the existing Sunwear brands in the American market in 2017. Despite the toll of the hurricanes that swept through the regions of the United States where the brand is widely sold, a proactive policy of developing ties with new customers and independent opticians continued to pay off. Costa also expanded further into the northeast and central part of the country and positioned itself to step up its growth in California in 2018.

In China, Xiamen Yarui Optical (Bolon(TM)) saw its revenue contract in 2017. The company continued to implement its strategic action plan during the year to improve its situation and bolster the Bolon(TM) and Molsion(TM) brands. This action plan involves reducing and optimizing inventories at distributors, redefining terms of sale and leveraging greater insight into consumer purchases from retailers. Additional human resources were brought on board, and the Company continued to expand its business in ASEAN and on the internet. Meanwhile, Photosynthesis Group (MJS) delivered good results for its first year as part of the group and opened 250 new stores, bringing the year-end total to 1,200.
In Turkey, Merve continued to do well with its Ossé(TM) and Mustang(TM) brands.

Equipment
Revenue at the Equipment division increased by 5.8% like-for-like(a). This growth was driven primarily by sales of VFT-Orbit 2(TM) digital generators and Multi-FLEX(TM) polishers in Europe, which were buoyed by fresh investments and upgrades to existing production lines. In Asia, the addition of new production capacity, notably in the form of complete laboratories, fueled strong sales of digital surfacing machines, polishers and coating machines as well as a surge in services business. Gains were recorded in Latin America after several midsize labs switched to digital surfacing. Sales in the United States were flat for the year, though a sharp increase in orders for generators and polishers in the last quarter drove up the backlog for the division, which bodes well for the early months of 2018.

FOURTH-QUARTER 2017 CONSOLIDATED REVENUE


€ millions
2017 2016 Change
(reported)
Change
(like-for-like(a))
Scope effect Currency effect
Lenses and Optical Instruments 1,557 1,549 +0.5% +5.2% +1.2% -5.9%
North America 665 657 +1.2% +8.8% +1.1% -8.7%
Europe 490 480 +2.2% +2.4% +0.5% -0.7%
Asia/Pacific/Middle East/Africa 285 286 -0.6% +4.8% +2.0% -7.4%
Latin America 117 126 -6.8% -2.0% +2.5% -7.3%
Sunglasses & Readers 201 192 +4.8% +3.1% +9.0% -7.4%
Equipment 71 68 +4.1% +9.0% -0.1% -4.9%
TOTAL 1,829 1,809 +1.1% +5.1% +2.0% -6.0%

In the fourth quarter, revenue rose 7.1% excluding currency effects with like-for-like(a) accelerating from the third quarter, to 5.1%.
Sales were up on a like-for-like basis(a) at all businesses: Lenses and Optical Instruments (+5.2%), Sunglasses & Readers (+3.1%) and Equipment (+9.0%).
The 2.0% consolidation scope effect reflected contribution from acquisitions completed earlier in the year.
The negative currency impact (-6.0%) mainly resulted from considerable depreciation of the US dollar against the euro.
By region and division, the period saw:

  • A sharp acceleration in business growth in the United States, notably fueled by the launch of the Varilux® X series(TM) and Crizal® Sapphire(TM) 360° lenses
  • Continued momentum in Europe
  • Good performances in fast-growing countries with the exception of Brazil and India
  • Recovery at the Sunglasses & Readers division driven by good results at FGX and Costa in the United States and Photosynthesis Group (MJS) in China
  • An anticipated rebound at the Equipment division.

ACQUISITIONS AND PARTNERSHIPS

The Company completed nine transactions in 2017, representing combined full-year revenue of close to €87 million.

Company Country Business Full-year revenue % held Consoli-dated from
  Lenses & Optical Instruments - North America
Partners In Vision, Inc. United States Service platform for eyecare professionals N.D.[2] 100% May 1, 2017
Vision Associates, Inc. United States N.D. 60% May 1, 2017
  Lenses & Optical Instruments - Europe
CFE Optique France Distributor of optical products (ophthalmic lenses, frames and instruments) to opticians in Central and Western Africa c.€2.5 million 100% Sept. 1, 2017
Optitrade Logistics Center (OLC) Netherlands Distribution platform for Optitrade, a purchasing alliance representing some 650 optical stores in the Netherlands N.D. 50.2% February 1, 2017
  Lenses & Optical Instruments - Asia/Pacific/Middle East/Africa
Sun Optical Technologies Ethiopia Prescription laboratory €1 million 51% January 1, 2018
Mangalsons Optics PTE Ltd India Distributor of plastic and glass lenses, sunglasses and prescription frames c.460 million Indian rupees 50% February 1, 2017
Topcon Visioncare Japan (TVJ) Japan Distributor of Topcon's optometry line and Essilor's lens finishing line to opticians in Japan N.D. Raised from 10%
to 51%
March 1, 2017
  Lenses & Optical Instruments - Latin America
Visolab Produtos Opticos Ltda Brazil Prescription laboratory located in the State of Sergipe c.22 million Brazilian real 51% February 1, 2017
Opticas Exclusivas Guatemala Integrated prescription laboratory operating around 50 optical stores N.D. 70% April 1, 2017

All of the above companies will be fully consolidated by Essilor from the date they are added to the scope of consolidation.

STATEMENT OF INCOME

INCOME STATEMENT, REPORTED/ADJUSTED(f)

€ millions 2017
Adjusted(f)
Adjustment items 2017
Reported
2016
Reported
Revenue 7,490   7,490 7,115
Gross profit 4,346   4,346 4,181
Contribution from operations(b) 1,367 (6) 1,361 1,321
Other income/expenses (119) (168) (287) (91)
Operating profit 1,248 (174) 1,074 1,230
Income tax expense (262) 131 (132) (285)
Net profit
  Attributable to equity holders
922
833
(44)
(44)
878
789
880
813
Earnings per share (in €) 3.85   3.64 3.79

(b) Revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs and other operating expenses).

(f) There are two main types of adjustment items. First, expenses associated with the planned combination with Luxottica, and, second, the positive effects of tax changes in the United States and France.
These non-recurring adjustments include:

  • Transaction costs related to the proposed combination with Luxottica for €109 million;
  • An additional cost of €45 million principally linked to the lifting of performance conditions for two employee shareholding plans;
  • A one-time contribution for €19 million to mission-related programs focused on eradicating poor vision worldwide;
  • An exceptional gain from the refund of the 3% dividend tax in France, net of one additional tax, for €19 million;
  • A one-time gain linked to tax reform passed in the United States in December 2017 for €73 million.

CONDENSED ADJUSTED(f) INCOME STATEMENT

€ millions 2017
Adjusted(f)
2016
Reported
% change

 
Revenue 7,490 7,115 +5.3%
Gross profit
(% of revenue)
4,346
58.0%
4,181
58.8%
+3.9%
--
Operating expenses 2,979 2,860 +4.2%
Contribution from operations(b)
(% of revenue)
1,367
18.3%
1,321
18.6%
+3.5%
--
Other income and expenses from operations (119) (91)  
Operating profit
(% of revenue)
1,248
16.7%
1,230
17.3%
+1.5%
--
Finance costs, net (64) (66) --
Income tax expense
Effective tax rate
(262)
22.1%
(285)
24.5%
--
--
Net profit
  Attributable to equity holders
  (% of revenue)
922
833
11.1%
880
813
11.4%
+4.8%
+2.5%
--
Earnings per share (in €) 3.85 3.79 +1.6%

(b) Revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs and other operating expenses).

ADJUSTED(f) NET PROFIT ATTRIBUTABLE TO EQUITY HOLDERS UP 2.5%

3.9% increase in gross profit
Gross profit (revenue less cost of sales) reached €4,346 million in 2017, or 58.0% of revenue, compared with 58.8% in 2016. Despite the operating efficiency gains achieved, gross margin contracted due to two main factors: a shift in the mix of distribution channels, notably reflecting the rapid growth of the online activities where gross margin tends to be below the group average, and a decline in sales of Transitions® lenses to manufacturers outside the group.

Adjusted(f) operating expenses: up 4.2%
Adjusted(f) operating expenses amounted to €2,979 million, which was 39.8% of revenue versus 40.2% in 2016.


These charges mainly included:

  • R&D and engineering costs, which totaled €217 million, up slightly from 2016;
  • Selling and distribution costs, which rose to €1,845 million from €1,750 million in 2016 mainly because of sales force expansion.


Adjusted(f) contribution from operations(b): 18.3% of revenue

The adjusted(f) contribution from operations(b) rose 3.5% (of which 2.7% like-for-like(a)) to €1,367 million, representing 18.3% of revenue, and was slightly down from 2016 (18.6%) due to:

  • Dilution resulting from bolt-on acquisitions(c);
  • Significant investments to reinforce the organization in China as well as economic situations, including the one in Brazil, that offset the positive operating leverage effects.

Adjusted(f) operating profit: up 1.5% to €1,248 million or 16.7% of revenue
"Other income and expenses from operations" represented a net expense of €119 million, up from €91 million in 2016. The total for 2017 mainly included:

  • €33 million of restructuring provisions, mainly related to the streamlining of some production sites and the restructuring of certain trade flows;
  • €82 million of compensation costs for share-based payments (particularly performance share plans), which was higher than 2016 because of the Company's proactive employee share ownership policy;
  • €17 million of net expense associated with the settlement of litigation ;
  • A €9 million profit from the sale of certain real estate assets in France.

Finance costs and other financial income and expenses, net
This item came to a net expense of €64 million, compared with €66 million in 2016. The improvement was attributable to debt reduction in the second half of 2017.

Adjusted(f) net profit up 4.8% to €922 million
Adjusted(f) net profit includes €262 million in income tax expense compared with €285 million in 2016, for an effective tax rate of 22.1% versus 24.5% in 2016. The reduced rate was mainly due to the continued application over the full year of the advance pricing agreement (APA) on royalty rates signed between France and the United States in 2016.

 The adjusted(f) net profit attributable to equity holders of Essilor amounted to €833 million, an increase of 2.5% over the prior year. This included €89 million in non-controlling interests, up from €67 million in 2016. This increase resulted from the consolidation of Photosynthesis Group beginning January 1, 2017 and from the contribution of results delivered by the Company's partners.

Adjusted(f) earnings per share came to €3.85, an increase of 1.6% versus 2016.


BALANCE SHEET AND CASH FLOW STATEMENT

NET DEBT LOWERED TO 1.7 BILLION EUROS

Capital expenditure and investments
Purchases of property, plant and equipment and intangible assets reached €308 million in 2017, primarily comprising capital expenditure to support the Company's growth.
Financial investments amounted to €317 million. This total mainly included acquisitions made during the year as well as subsequent, ancillary payments on transactions from previous years.

Change in working capital requirement
Working capital requirement rose by €58 million in 2017, consistent with underlying revenue growth.

Operating cash flow(d)
Operating cash flow(d) rose to €1,291 million, driving a 2.8% increase in free cash flow to €925 million. Free cash flow(e) increased by 4.0% when adjusted for non-recurring items related to the German competition authority (BKA) in 2016 and to 2017 items including costs linked to the proposed transaction with Luxottica along with litigation settlements.

Net debt
Essilor's net debt reached €1,661 million at end-December 2017 versus €2,062 at end-December 2016, leading to a material reduction in the financial leverage.

CASH FLOW STATEMENT

 

€ millions
     
Net cash from operations (before change in WCR1) 1,291 Capital expenditure 308
Proceeds from share issues 34 Change in WCR1 58
Other items3 122 Dividends 364
    Acquisition of investments, net of disposals2 317
    Reported change in net debt 400

1 - WCR: working capital requirement
2 - Financial investments net of cash acquired, plus debt of newly-consolidated companies

  1. - Other items include an €96 million currency effect

 PROPOSED COMBINATION OF ESSILOR AND LUXOTTICA

On January 16, 2017, Essilor and Delfin, the majority shareholder in Luxottica, announced that they had signed an agreement to create an integrated global player in the eyewear industry with the combination of Essilor and Luxottica. The transaction is subject to satisfaction of several conditions precedent.
In March 2017, employee representative bodies at Essilor issued favorable opinions on the combination. On April 12, 2017, the French market authority (AMF) waived Delfin'sobligation to file a mandatory tender offer for Essilo'rs shares.
On May 11, 2017, shareholders at the General Meeting and double voting rights holders at the Special Meeting approved the combination.
On November 1, 2017, Essilor completed the hive-down of its activities. Essilor will be renamed "Essilor Luxottica" once the other conditions precedent to completing the contribution of Luxottica shares to Essilor have been satisfied, and it will become the holding company at the top of the combined group housing Essilor International and Luxottica.
Essilor and Luxottica have also jointly filed notices with the antitrust authorities in several countries, notably in five jurisdictions (Brazil, Canada, China, the United States and Europe) whose approval is a condition to complete the combination. To date, the deal has been unconditionally approved in Canada and twelve other countries: Australia, Chile, Colombia, India, Japan, Mexico, Morocco, New Zealand, Russia, South Africa, South Korea and Taiwan.

SUBSEQUENT EVENTS

None.


APPENDIX 1

ESSILOR INTERNATIONAL REPORTED STATEMENT OF INCOME

€ millions 2017
Reported
2016
Reported
% change

 
Revenue 7,490 7,115 +5.3%
Gross profit
(% of revenue)
4,346
58.0%
4,181
58.8%
+3.9%
--
Operating expenses 2,985 2,860 +4.4%
Contribution from operations (b)
(% of revenue)
1361
18.2%
1,321
18.6%
+3.0%
--
Other income (expense) (287) (91) --
Operating profit
(% of revenue)
1,074
14.3%
1,230
17.3%
-12.7%
--
Financial income (expense), net (64) (66) --

 
Income tax
Effective tax rate
(132)
17.6 %
(285)
24.5%
--
--
Net profit
Attributable to equity holders of Essilor International
(% of revenue)
878
789
10.5%
880
813
11.4%
-0.1%
-3.0%
--
Earnings per share (in €) 3.64 3.79 -4.0%
  1. Contribution from operations corresponds to revenue less cost of sales and operating expenses (research and development costs, selling and distribution costs and other operating expenses).

APPENDIX 2

Consolidated Revenue by Quarter

€ millions 2017 2016
First Quarter    
Lenses & Optical Instruments 1,713 1,567
  • North America
767 710
  • Europe
508 470
  • Asia/Pacific/Middle East/Africa
311 283
  • Latin America
127 104
Sunglasses & Readers 199 173
Equipment 50 44
TOTAL First Quarter 1,962 1,784
Second Quarter    
Lenses & Optical Instruments 1,669 1,562
  • North America
715 668
  • Europe
529 495
  • Asia/Pacific/Middle East/Africa
304 282
  • Latin America
121 117
Sunglasses & Readers 218 187
Equipment 60 50
TOTAL Second Quarter 1,947 1,799
Third Quarter    
Lenses & Optical Instruments 1,559 1,541
  • North America
658 671
  • Europe
487 461
  • Asia/Pacific/Middle East/Africa
293 288
  • Latin America
121 121
Sunglasses & Readers 148 132
Equipment 45 50
TOTAL Third Quarter 1,752 1,723
Fourth Quarter    
Lenses & Optical Instruments 1,557 1,549
  • North America
665 657
  • Europe
490 480
  • Asia/Pacific/Middle East/Africa
285 286
  • Latin America
117 126
Sunglasses & Readers 201 192
Equipment 71 68
TOTAL Fourth Quarter 1,829 1,809



[1] Varilux® X series(TM) lenses + Crizal® Sapphire(TM) 360° UV +Transitions® Signature® VII for progressive wearers
Eyezen(TM) lenses + Crizal® Sapphire(TM) 360° UV + Transitions® Signature® VII lenses for single-vision wearers

[2] Not disclosed




This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Essilor International via Globenewswire

Copyright GlobeNewswire, Inc. 2016. All rights reserved.
You can register yourself on the website to receive press releases directly via e-mail to your own e-mail account.