The Board of Directors of Essilor International, the world leader in ophthalmic optical products, today announced its audited financial results for the year ended December 31, 2008.
(1) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expense, and goodwill impairment.
In an ophthalmic optics market that experienced slower growth, especially in the fourth quarter, Essilor demonstrated the solidity of its business model. With growth of 9.7% in 2008 (excluding the currency effect), the Company increased its market share while maintaining its margins and capacity for future investment.
Annual Shareholders’ Meeting
The Annual Shareholders’ Meeting will be held on Friday, May 15, 2009 at 10:30 a.m. at Palais de la Bourse, Place de la Bourse, 75002 Paris.
The Board of Directors will ask shareholders to approve a dividend of EUR0.66 per share, an increase of 6.5% over the previous year. The dividend will be payable as from May 26, 2009.
Acquisitions in 2009
Pursuing its expansion in Asia-Pacific, Essilor has finalized four acquisitions in Australia representing EUR3.6 million in full-year revenue. Equity interests were acquired in three prescription laboratories-Prescription Glass Pty Ltd, Precision Optics Pty Ltd and Wallace Everett Lens Technology Pty Ltd-and a 50% stake was acquired in Sunix, a developer of optometric practice management systems.
Outlook
In 2009, the global recession has made forecasting growth for the year very uncertain. However the economic crisis does not call into question Essilor’s medium- and long-term objectives and the Company will pursue its development and the deployment of its strategic focus on innovation and international expansion. Earlier this year, the Company launched its new Crizal(R) Forte anti-reflective lens in Europe and the United States, the Transitions(R) VI variable-tint lens in Europe and its new Mr. Blue edger. Essilor will also continue to make targeted acquisitions, especially in prescription laboratories, which could account for around 6% of growth in 2009, including the full-year contribution of 2008 acquisitions. Lastly, the Company will continue to optimize its management practices in response to changes in the economic environment.
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Next financial announcement: First-quarter revenue will be released on April 23, 2009.
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Essilor International is the world leader in ophthalmic optical products, offering a wide range of lenses under the flagship Varilux(r), Crizal(r), Essilor(r) and Definity(r) brands to correct myopia, hyperopia, presbyopia and astigmatism. Essilor operates worldwide through 15 production sites, 292 lens finishing laboratories and local distribution networks.
The Essilor share trades on the Euronext Paris market and is included in the CAC 40 index.
Codes and symbols: (ISIN: FR 0000121667; Reuters: ESSI.PA; Bloomberg: EI:FP).
Revenue by geographical segment: Europe 44.3%; North America 41.3%; Asia-Pacific and other 9.2%; Latin America 4.1%; Satisloh 1.1%.
INCOME STATEMENT
Gross margin up 0.1 point excluding acquisitions
Gross margin (corresponding to revenue less cost of sales, expressed as a percentage of revenue) narrowed by 0.7 points to 56.9% during the year, as a result of the dilutive impact of acquisitions, in particular Satisloh. Excluding acquisitions, gross margin grew by a modest 0.1 point.
Operating expenses down 0.4 points
Operating expenses amounted to EUR1,198.2 million in 2008. As a percentage of revenue, they declined by 0.4 points during the year, to 39.0%. The decrease reflects:
(1) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expense, and goodwill impairment.
(1) Operating profit before compensation costs of share-based payments, restructuring costs, other income and expense, and goodwill impairment.
In all, contribution from operations increased 4.5% to EUR551.2 million in 2008, while the contribution margin was a slight 0.2 points lower at 17.9% of revenue. Excluding Satisloh, contribution from operations increased by 5.0% and the contribution margin was 0.1 point higher at 18.2%.
Other income and expenses from operations
Other income and expenses from operations represented a net expense of EUR36.3 million for the year (an increase of EUR13.8 million), mainly comprised of:
Operating profit
In 2008, operating profit (corresponding to contribution from operations plus or minus other income and expenses from operations and gains and losses on asset disposals) rose 2.0% during the year to EUR514.5 million (16.7% of revenue) from EUR504.6 million (17.3%) in 2007.
Finance costs and other financial income and expenses: sharp improvement
Finance costs and other financial income and expenses represented a net expense of EUR2.5 million, versus EUR6.5 million in 2007. The improvement was led by a reduction in net finance costs due to a higher average cash position for the year (as the Satisloh acquisition price was settled in the fourth quarter).
Income tax expense: effective tax rate of 29.2%
Income tax expense of EUR149.3 million represented an effective tax rate of 29.2%, down from 31.3% in 2007. The improvement was led by a lower tax rate in the United States, and to a lesser extent in the Latin American countries, as well as by sharply higher earnings in regions where tax rates are below the Company average.
Share of profits of associates
The share of profits of associates Sperian Protection (15%-owned), Transitions (49%-owned) and Vision Web (44%-owned) was slightly lower, at EUR26.1 million. The decline resulted mainly from Sperian Protection’s earnings and also from the negative impact of the dollar on Transitions’ earnings, although the company had a good year.
Profit attributable to equity holders of the parent up 4.3% and earnings per share of EUR1.85
Consolidated net profit totaled EUR388.8 million for the year, an increase of 4.8%. Profit attributable to equity holders of the parent was 4.3% higher at EUR382.4 million and represented 12.4% of revenue (12.7% excluding Satisloh), virtually unchanged from 2007. Earnings per share grew 3.7% to EUR1.85.
BALANCE SHEET
Goodwill
Goodwill totaled EUR958 million at December 31, 2008, an increase of EUR367 million principally due to the Satisloh acquisition.
Inventories and working capital
Inventories amounted to EUR475 million at December 31, 2008, up 21% from a year-earlier as reported and 9.1% like-for-like.
(1) Cash provided by operations less change in working capital requirement and provisions.
Capital expenditure net of disposals totaled EUR182.9 million or 5.9% of consolidated revenue for the year. Around two-thirds of expenditure was committed to distribution operations and prescription lens laboratories, with series production accounting for the rest.
Financial investments net of disposals amounted to EUR617.5 million. Of this amount, acquisitions accounted for EUR505.0 million, while net buybacks of shares accounted for EUR112.5 million.
(1) In all, the proceeds from disposals of property, plant and equipment and non-current financial assets totaled EUR3.8 million in 2008.
The Company’s very good operating performance for the year enabled it simultaneously to continue investing in subsidiaries’ production resources, significantly increase the size of its financial investments and recommend a further increase in the dividend, while maintaining its solid financial position. At December 31, 2008, net debt stood at EUR112.3 million and gearing amounted to 4.7%.
27 ACQUISITIONS IN 2008
In 2008, Essilor maintained its sustained pace of external growth, carrying out 27 acquisitions during the year, mainly prescription laboratories. This strategy was deployed in all regions, with 15 acquisitions in North America, seven in Europe, three in Asia and one in Brazil, as well as Satisloh, the world leader in optical manufacturing solutions for prescription laboratories.
Satisloh
During the year, Essilor acquired all outstanding shares of Satisloh Holding AG. Created by the merger of Satis and Loh in 2004, Satisloh has a global distribution network and is the world’s leading supplier of prescription laboratory equipment. It manufactures and markets anti-reflective coating units and surfacing machines, as well as consumables, to independent prescription laboratories, integrated lens manufacturers and optical chains. It reported revenue of EUR139 million in 2008 and has more than 400 employees. The acquisition strengthens Essilor’s capabilities for developing innovative products, technologies and services for the entire ophthalmic lens industry.
(a) 2006 figures have been adjusted for the option of recognizing actuarial gains and losses on pensions and other post-retirement benefits directly in equity.
(a) 2006 figures have been adjusted for the option of recognizing actuarial gains and losses on pensions and other post-retirement benefits directly in equity.
(a) 2006 figures have been adjusted for the option of recognizing actuarial gains and losses on pensions and other post-retirement benefits directly in equity.
(a) 2006 figures have been adjusted for the option of recognizing actuarial gains and losses on pensions and other post-retirement benefits directly in equity.
CONTACT: Investor Relations and Financial Communications, Veronique Gillet
- Sebastien Leroy, Phone: +33(0)1-49-77-42-16
