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EDITED TRANSCRIPTEI.PA - Full Year 2014 Essilor International Compagnie GeneraleD'Optique SA Earnings Presentation

EVENT DATE/TIME: FEBRUARY 19, 2015 / 9:30AM GMT

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C O R P O R A T E P A R T I C I P A N T S

Hubert Sagnieres Essilor International - Chairman & CEO

Laurent Vacherot Essilor International - COO

Jean Carrier-Guillomet Essilor International - President, Essilor of America

C O N F E R E N C E C A L L P A R T I C I P A N T S

Stephane Sumar Natixis - Analyst

Claremont James - Analyst

Antoine Belge HSBC Global Research - Analyst

Michael Boyd Ben Capital - Analyst

Alex Kleban Barclays - Analyst

Justin Morris Citigroup - Analyst

P R E S E N T A T I O N

Hubert Sagnieres - Essilor International - Chairman & CEO

(interpreted) Good morning, ladies and gentlemen. When we were discussing earlier on, some of you congratulated us about the results. But what'smost important, you thanking us because of this; because of the smiles, the happiness you can see on all these faces.

More than hundreds of millions of people in 2014 improved their lives because, thanks to all of us, thanks to all these 58 million people in the world,we improved their smiles by improving their lives, thanks to a better vision, better performance, by protecting their eyes, or with lenses that havebetter performance. And that is the most important message.

I'll go back on this point several times this morning. This is why we see these smiles on all these faces here today, because this company in whichyou've invested, Essilor, whom you're advising, is a powerful company; it's successful. And it hinges on some extraordinary facts that we're goingto talk to you about this morning.

So, of course, it's happiness; figures, figures that are growing everywhere: EBITDA at 24%, growth at 13%, and market share that is also growing;EUR800 million of cash flow.

Earlier on, we had three bodyguards, and we had Geraldine with her box, with her EUR800 million of cash flow so that nobody attacks her. Andbehind all that, it's the power of a company that has a mission, a vocation, that is to improve the sights of people.

What I'd like to do in the first part of this presentation is to talk about the highlights, the success, the reason why Essilor is successful, and wassuccessful in 2014, especially.

So now the first thing, as I told you five years ago, four years ago, three years ago, some of you looked us with a small smile. The American marketis the fastest-growing market in lenses. And today in 2014, 2015, it is driving growth. Why? Because all the indicators, all the ratios on the Americanmarket, are 15 years behind the best countries.

The most advanced country in anti-reflective lenses is China, 80% anti-reflective lenses; and in the United States, there are 25%. And you know thatwhen the American economy functions better and accelerates, well, then immediately the market of lenses grows.

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FEBRUARY 19, 2015 / 9:30AM, EI.PA - Full Year 2014 Essilor International Compagnie Generale D'Optique SAEarnings Presentation



The second driving force are all the emerging countries, whether it is Latin America, Asia, where we have redeployed part of our forces, and that'salso driving the Group's growth in 2014.

Our sunwear business, Internet business, that is the core of what we're going to talk to you about today. It's the repositioning, this strategicredeployment of Essilor that we carried out in 2013, and that bore fruit in 2014. This allowed the acceleration of all the indicators you've seen. Andit is going to still be deployed in 2015, and all the teams here are going to keep smiling because of this in 2015, in fiscal 2015 and in the followingfiscal years.

As for sunwear, we're very clear. We are in performance. We are not in fashion. We're in mass. We're in improvement. We're in mission; prescriptionlenses. And this is what will be explained to you in full details, as Eric will talk about that.

Internet, well, yes, we're by far the leaders in that sector with growth rates that are superior to 20%, growth then 20%. And it is a market that isdeveloping very fast. Jean will show you what's happening on that market around the world.

A very dynamic year in terms of acquisitions and partnerships. I'd like to welcome Shamir's team, our partner in Israel; the President of the KibbutzShamir, who is here with us. I'd like to thank you all. Congratulations. He's done an excellent performance, and that is the driving force of all ourdeployment, whether it's in sunwear. And he's a partner who is deploying around the world, in Singapore, in the United States. And it is one of thehotspots of technology, progressive lenses, design, of our research system around the world.

So some major acquisitions last year with the acquisition of Transitions. And thanks to Thierry Robin's teams and Bertrand [Roy], and [Paris] teamin the United States. They could deploy all the synergies. We reinvested all that in marketing, consumer marketing. And we're going to keepdeploying, as you will see during 2015, because we showed that we were capable, we could have immediate results on those by accelerating ourconsumer advertising major brands.

And behind all this, the major difference between us and all the others, our operations, our supply chains, our logistics, where we reached an apexin terms of efficiency. And what is very important is that there is an entry barrier which is unequalled by our competitors. And this allows us to wincontracts and to win them and retain them over a long period of time.

We cannot show you everything today, but later on, you can talk to our new manager, [Bernard Luserre], our manager in Europe in the first row.It's thanks to our supply chains, our factories, our laboratories offshore that we could win major contracts in the UK, in Spain, and retain them overa certain period of time, because no one can equal us in terms of the complexity and the success of our supply chain.

And behind all this, there is this major geographical deployment around the world. You know that our mission is to improve and protect the visionof some 7 billion people, 7 billion people who are around the world; 60 million in France, 4.4 billion in Asia. We've redeployed our teams in 2013/2014,2012 also around the world, and now increasingly so in a region where we were not present, in Africa and in the Middle East.

And thanks to that, we can seize all the opportunities on all the markets, the smallest markets where we are present today, where we are players.And we can keep winning market shares and we can enter new countries, because unfortunately, we are present in only 120 countries whereasthere are 200 countries in the world. And we can still plant our little Essilor, our Shamir, our Nikon flags in some 80 more countries.

And we have a team of 25 people that's managing the entire Group, distributed around the world that is managing a team of 58,000 people in theworld dedicated to improving the sights of people, dedicated to our mission, and who month after month, week after week, are fighting to presentthe creation of value and this Company that we all love. And that is why you are here today to listen to us.

So that is the situation in 2014. 2015, Laurent is going to talk to you about this. But today, we wanted to go back on the major strategic elements,and we'll talk to you about all this after we talk about the financial situation. And this will be done by Laurent.

Thank you.

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Laurent Vacherot - Essilor International - COO

(interpreted) Thank you. Good morning. I think that the financial presentation will be maybe the least exciting moment of this morning, so we'lltry to do this as enthusiastically as possible.

Remember, a year ago, we were all here; most of us were here. We were all very enthusiastic. Some of you too, others were more skeptical, whenwe had presented the objectives that we had given ourselves for the year. The objectives, apart from the acquisition of Coastal, so as you can seethanks to what Hubert has just said, we've executed the strategy; we've redeployed new sectors that has growth.

And so we are above the objectives fixed, or we are better than the objectives fixed. That is true for growth and for the contribution adjusted to18.6% integrating the dilutive effect of Coastal.

So we had a very good last quarter, 18% growth. And finally, we had a positive exchange rate, 4%. And we expected to continue, at least in the firsthalf of 2015, and an organic growth that went up to 5%, basing ourselves on the American performance, the fast-growing market and the verygood performance in the fourth quarter of sunglasses, readers. And Bolon had a very good figure in November and December.

So when you look at the P&L, here I'm commenting the adjusted figures, because as in H1 after the major acquisitions that took place during theyear, we have published accounts and we have some one-off items, non-cash items that are disturbing the economic vision of things. So here, I'mcommenting the adjusted accounts.

So the revenue up 12%. Gross margin for the faster growth is [18%]. And this is the entire [contribution], thanks to innovation, thanks to the marginof Transitions that we've integrated at 100%.

EBITDA is growing at 16%. I think this is the first time we're showing it as such, EBITDA. This is an indicator that we'll be following, monitoring,anticipating, because it reflects better the cash generation related to our business.

Contribution from operations has reached a record level, 18.6% plus 15%, so this is a performance that we believe is excellent.

Revenue, I'm not going to spend too much time on it. All the components of growth are there, 3.7%, the strong contribution of bolt-on acquisitions;and the two strategic acquisitions, Transitions, which accounts for 3% in the 4.8%, and Coastal.com in the 4.8%.

And the currency effect was negative but quite weak, because in H2, the euro was depreciated compared to the dollar and vis-a-vis certain othercurrencies. So when we analyze further this growth, you know that we are really focusing on like-for-like growth, but you have this combinedgrowth, like-for-like growth, bolt-on acquisitions, so 8.8%.

So all the geographies, all the divisions exclusively almost have contributed to this growth. I'd like to raise my hat to North America that is close tocatching up the fast-growing countries. So when you look at each and every division, and what is striking in this chart is the acceleration of growthin H2 in all the divisions.

Lenses has gone above 5% growth. Sunglasses and readers, at the beginning of the year we commented this, and on a quarterly basis they areclose to equilibrium. And we had promised that the equipment division, in spite of the fact that a lot of their clients, a lot of Group companies, theydo not really reflect -- their revenue does not really reflect their business, they are close to zero with a very good last quarter.

If we go further down in lenses and equipment, which is the core, our core business, and we'll talk about the American performance, 8% combinedgrowth with 6% organic growth or like-for-like growth in H2. We've talked about the fast-growing countries. I'll come back on this a little later. Iwanted to underline because part of the European teams are here and the 1% growth in Europe we're very proud of this.

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In this difficult environment, we had announced during the year that in the following years, we anticipate a European market between zero and1%. So to reach 1% is very good; we were very proud of that. And Europe is really holding on tight in terms of sales and profitability and we can,therefore, support the development of other regions. And I wanted to underline it here.

Now you will recall when we talked before we set ourselves an objective, EUR1.5 billion revenues in fast-growing markets, that was a couple ofyears ago we said that. And we said we'd achieve that by 2015, hopefully. That was our guidance. And we readjusted this to stand at EUR2.8 billionin 2018. That was done in June when we explained our strategy and the way in which we are expanding.

So this figure is, therefore, quite well on the way to achieve the EUR2.5 billion or EUR2.8 billion figure. With the combined growth you see here for2014, that's now quite a lot for the Group. It's 22%. That's substantial in speeding up our growth. And you'll see all the regions then, growth levelsthat are fairly dynamic. This figure is the combination of pure organic growth, like-for-like growth, and also growth via bolt-on acquisitions.

So we have a momentum we've built up now, and the AMERA teams and Latin American teams are really supporting our strategy and coming upwith the goods, so to speak, coming up with their objectives.

So it was a year that was very rich in terms of acquisitions too. That is bolt-on acquisitions and these two major strategic acquisitions. We shouldbear in mind this mobilizes all of our people all over the world. So as to integrate these acquisitions, the integration plans and synergy plans arein place, and I think we can say that we're a bit ahead of our integration plan for Transitions.

And also Coastal.com, we'll be talking about it later on, Jean will talk about it. But we're very happy with the way things are going there in Coastal.com.

Now in order to explain the progression in the contribution margin, 18.2% adjusted and 18.6%, as you see on this screen, we've got Transitions atCoastal.com that have both impacted our profitability.

So we've broken the situation down into the effects of the acquisition on the left of the slide here with the 100 basis points generated by the pureaccounting integration of the 51% of Transitions we didn't hold up to now that we now have; also the diluting effect announced by Coastal.comfor the eight months we had it in 2014, 50 basis points there; and the usual effect, small this year, of the bolt-on acquisitions.

So that reconfigures the situation where we've got the basis points starting off like that; 18.5% profitability, operating profitability, as you see.

Then after that, you see the levers, the drivers to improve profitability conventionally. The ones we talk about the pricing power, operationalefficiency, they kicked in. Then you see the synergies as well, especially with Transitions. We developed those synergies and they generated 70basis points of profitability additionally, which, as we said up front, we more or less invested it all in media, consumer media efforts. And also, inprevious years, we've put in EUR32 million, I think that's the exact figure, into consumer marketing in big countries for us; Crizal, Transitions andExperio and such products.

So that gives you now the profile for the trend in the margins of Essilor in the coming few years.

We recall then that the accounting standards that we've got to stick to and respect aren't in our favor here because the integration a few years agoof acquisition costs and depreciation costs, amortization and so on of assets, well, the rules were different. And the thing is, year-in, year-out, therules are curbing us in growing our operational profitability in our accounts.

You can see it's particularly the case this year with the big acquisitions that we integrated, and the PPAs went up from EUR30 million to EUR64million. So if you put yourself a few years back, the improvement in profitability would have been increased on a comparable basis by 200 basispoints, so then we'd be quite close to 20% this year. But given the accounting rules, we've got to stick to them. That's the way it is.

So you have now the figures for growth; 9% in earnings per share. If you take out the ForEx effect, that was negative diluting and the effect ofintegrating Coastal, and we know that in year 1 it will be diluting.

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So you see then the financial expenses. Well, that went up quite a lot because of the increase in our debt; no surprise there. The effective tax rate,the income tax and effective tax rate, we've grown our business in the United States; and also, there have been some withholding taxes. We'vehad to pay as well withholding taxes that we had to pay because we repatriated from the different subsidiaries the monies we needed to fuel ouracquisitions. So that went up slightly then, the taxation rate. 26% effective tax rate you see.

In 2015, we should be close to that ETR rate as well and then start going down some time in 2016 or 2017 with the efforts being put in by our teamsto improve our effective taxation rate.

Now the minority interests, we pay back to the minorities some of the profits, that EUR60 million. The increase comes mainly from the fine profitabilitywe've generated in our Chinese Company, Xiamen Yarui, which actually operates the Bolon brand in China.

Then we have the capital expenditure. Well, in the second half of the year, we fast-tracked those investments once again, the capital expenditure.So the message is: We're continuing to do capital expenditure so as to sustain the growth of the Company in the market which, as we explained,is a huge market and a growing market.

And therefore, we this year achieved EUR227 million. That's 4% of our revenues. It's in the lower part of the bracket of the benchmark that we setourselves between 4% and 5% for capital expenditure year in, year out.

Then one of the fine brands that we -- one of the fine tokens, sorry, of the quality of our results in terms of cash generation, you can see what thesituation is.

You can see that operating cash flow, EUR1,022 million, that's going up as quickly as the revenues. And then free cash flow, taking account of thecontainment of investments and prioritization of capital expenditure, and the working capital requirement that was fairly stable. So we generatedthe EUR800 million that Geraldine carries around with her in her portable safe. Isn't that right, Geraldine? That really shows what a company cando and the growth we can generate, that EUR800 million figure.

Now the debt. You will recall that in the first half, it went beyond the EUR2 billion level because of the strong acquisitions made in the first half.Then it went down below EUR1.8 billion.

Now the timing was in our favor for some of the acquisitions. So what we think for 2015 is that we should remain between EUR2 billion and EUR1.8billion; maybe with a little jump after the dividend payout on September 1. So the situation is quite under control, quite contained debt-wise.

The dividend per share. Now the Board of Directors met yesterday and it's the first dividend that will be paid out above EUR1, EUR1.02. So it's thesustained growth you see on the chart here. Over 20 years, over 40 years, some people here might be able to tell us what's happened over 40 years,but year in, year out, I don't think it's gone down ever.

So it's climbing up the whole time, and that's what's going to happen this time round as well. You see growth of 8.5% in the dividend per share.And that's a token of people's trust in us and also their trust in the future. And also, we thank our shareholders who support us, as well as the growthin the stock price. I think it's good for the shareholders, of course.

And this is my last slide. I wanted to give you some indications about the start of the year and how we see ourselves going forward in 2015. I'vealready talked a bit about the debt, the tax level, the investments and capital expenditures, and so on.

On the revenue side, I think that I won't comment on everything, but there are several important things to flag up. Firstly, the input and the benefitsin terms of growth of the EUR200 million of media consumer spend. That's for the consumer media, I mean. That will take place. And also, we'll seethe benefits of that coming in afterwards.

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Then we'll have a return to growth in the American part of FGX during the course of the year. That should ramp itself up in the second quarter andit should be more marked then in the second half of the year. Also, we'll be availing of the input of strong growth from Bolon in China and Costain the United States.

And then the last point is that we're expecting a very positive ForEx effect. We did a simulation. We took the figure for the end of January and wesaid if that were to remain the same, we'd have 9% to 10% growth in revenues, which would give us a strong lift. We've never seen that before. Wemay not see that, but that would give us strong support, the ForEx situation in our accounts this year, especially in the first half.

So that's what I wanted to share with you this morning about our accounts, and it crystallizes in terms of cash generation the fact that we've achievedsome fine things in 2014, and I think we can get off to a head start now in 2015.


(interpreted) Thank you very much, Laurent. And thank you, well done for achieving those figures. So thank you, Laurent, for Essilor.

168 years old now. We're only involved in optics. Only one industry, optics. That's what we're involved in. The IPO took place 40 years ago. In theroom, we have the person who actually IPO'd Essilor on October 18 40 years ago.

And 40 years ago of an equity story. 40 years of an equity story is a long equity story. And I think we've a fine track record in terms of growth. 17%when we introduced the dividends into the total shareholder returns, and so on. Some of you here will remember that. But it counts, but there areother things that count too, but we keep on harking back to the importance of improving our performance the whole time.

Now in this context, Essilor has been able to and will continue to deploy its efforts, and definitively, we hope so, be part of a highly performingfinancial story as well.

And I've got a slide to explain the reason why that can be. It's because we have a unique combination, a combination of three major factors here.The first one is that we're all imbued with this extraordinary mission we have to improve people's eyesight. Nobody can attack us on that. In timesof weakness and people's morale flagging, everybody latches onto this.

Also, we have a strategy that is totally clear. It is totally clear. Our strategy is explained by our teams around the world. Our strategy is understoodby 58,000 people working for us around the world. Our strategy is understood by all of our partners, be it Shamir, be it Nikon, be it Xiamen Yaruiin China, all our partners in Latin America or in the US, all our French partners, all European partners too. They've all taken part in putting togetherthat strategy, and they're fulfilling successfully, very successfully.

And via all of that we have extraordinary teams, people. We have people who pay attention to the details locally and get it right locally always. Andit's thanks to these three major pillars, the factors, that we're quite unique in the world, we think.

When you add to that the fourth major factor, which is a regular alignment between the shareholders and the employees, between -- with all ofthe deployment we have of employee shareholdership all over the world, going right down to the grass roots level with 25,000 people who havethe same concern about our performance, just as much as yourselves in the room, all your clients. So that is what makes Essilor unique. That is whatfor us, we think anyway, can explain the performance and the success of Essilor for the last 40 years year in, year out.

So this strategy is something that we've refocused. We refocused it in 2013. We conducted a strategic redeployment, as we call it. Now there wasthe traditional market that we had been on for years, lenses, eyeglasses, EUR11 billion worth growing 3% to 4%.

In 2013 then, we did strategic redeployment on a market of 27 billion growing between 6% and 7%. That's what we did. And we decided to redeploymore strongly in all the emerging countries, and we're continuing to develop, of course, in lenses, but also we're speeding up our efforts in onlinesales and in sunwear. And that's a strategic redeployment that now explains the enthusiasm of all of our people and the results we've achieved.

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And all this is taking place on a market where all the fundamentals are powerful, where there is regular growth year after year. We are still in amarket where there are only 4.5 billion people who have vision issues, and only 1.9 billion are wearing eyeglasses. Out of 7 billion people, 1.4 billionwear sunglasses. You have 5.8 billion that receive UVs right down to their brains.

You have two categories of clients: 1.7 billion of myopes, and this is growing by 3%; more than 2 billion of presbyopes, and it is increasing by 2.5%;and emergence of visual issues like cataracts and AMDs for all those who do not have, as me, Prevencia Essilor glasses. I am protected in any case.

We had determined in June our ambition, which is shared by everyone, our ambition for 2018, our strategic redeployment. First, our objectiveEUR2.8 billion in the fast-growing markets. We told you we would have EUR1.5 billion four or five years ago in 2015. Now we'll go past EUR2 billion.We're basing on ourselves on EUR2.8 billion in the fast-growing markets.

Our objective of growth in core business, in our traditional business, lenses, prescription lenses, by 5%, driven by innovation and our investmentsin our major brands for consumers.

Eric will talk you in detail. He'll tell you how we'll reach EUR1 billion of revenue in 2018 in sunglasses, and Jean will explain the fantastic growth wehave today in all our online activities.

And the objective is clear and shared by more than EUR8 billion in 2018 and EBITDA at roughly EUR2 billion; free cash flow of EUR1 billion. It soundsa bit low, Geraldine, now that you have EUR800 million in your attache case, but we're keeping this objective of EUR1 billion free cash flow, and anorganic, or like-for-like growth, which will go up to at least 6% in 2018.

How are we going to do this? It's very detailed. Each division has it in full details. I'd like to just mention two or three major points, or one or twomajor points, for the major categories in the fast-growing markets: Partnership, partnership, partnership.

We've asked the Shamir teams to redeploy in all kinds of regions in the world. We've asked the Nikon teams, the Latin American teams, Indianteams, to redeploy, to open new subsidiaries, to have new partnerships around the world.

Innovation is, of course, driving our market, our power in prescription lenses, combined with an acceleration of consumer marketing in all ourmajor brands. Sunglasses performance and prescription, of course; and online, we have like-for-like growth and acquisitions. And this is going toaccelerate until we reach our objective of EUR500 million in 2018.

Now the geographical breakdown of Essilor has really changed. In 2014, North America accounted for 45% of the Group. In 2015, it will be morethan that.

China is almost the second country of Essilor behind the United States. There's a fight between China, France and Brazil. So there are the currencies,etc. But these three countries are more or less on an equal footing in terms of deployment. It's huge. It wasn't the case two years ago.

And of course, there is strong acceleration in Asian countries, and Europe accounts for one-third of the Group. As you've seen, it is still growingslowly. And in Europe, we're also going to carry out some more acquisitions.

But value creation, the one that provides us with comfort, the fact that we are confident when we talk to you about growth and performance forthe future, well, that is because these three businesses in one single business, which is optics, they're all interconnected. And all this knowhowwe've accumulated in lenses, well, that is so that we might have a good performance in our online divisions.

We have to convince our clients about the deployment of our sunglasses business. Without one, we cannot guarantee the success of the other.The pure Internet players cannot succeed in the prescription market. You need to have a huge and solid supply chain, and it's the connection ofall three of these activities that will allow us to create value. And this is what will be explained to you in full details. We'll tell you what the majorobjectives, what we'll be focusing on in 2015 and 2016.

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So now if we first look at innovation, innovation is, of course, the core driver of Essilor. Today, we account for some 75% of the research expensesin the world to improve eyesight. This guarantees the pricing power that we have today, and this is what today, step by step, will allow us tointroduce -- we'll look at some of our products later on -- will allow us to have greater margins and profits that will be well perceived by theconsumers. Innovation will allow us to create value by strongly improving our margins.

And this is the new product we'll be introducing in 2015. So what is it? Two things. A design for lenses which is specific combined to a specificconsumer. So what is it? The Eyezen lenses is addressed to all of you and each one of you.

Look at your neighbor. What is he doing? How is he reading? He's reading at a certain distance? I see one who is reading by holding his book faraway. I see a person with two iPhones in his hands. He'll read from more closely. There's another person with a tablet. See there are differentdistances; you hold things at different distances from your eyes, so you need to have different designs.

Some of you, you have the light coming from your tablet or your computers. Others have the light coming from the projectors, from differentlighting systems. If you were outside, you would have sunlight. You have four/five different types of lightings and you need different coatings toprotect you. And Essilor Eyezen is a combination of all three. Thanks to four magical patterns registered by our teams, five years of deployment,we have a length and a design adapts to your reading distance and protects you from all the lights that come and aggress your eyes.

That is Essilor Eyezen. It was introduced and launched in Switzerland. It was a pre-test. It was very successful. [Ludovic], well, it's going to beintroduced in France in May. There will be pre-launches in the United States and will be then deployed in the rest of the world.

But it's not the only product we will be launching 2015. In 2015, we have a very rich portfolio of products. Last week, we were with Jean and Ericin the United States to launch, as we do the beginning of each year in front of the sales forces, the 2015 plan. The repositioning of the new VariluxComfort digitalized, or Varilux Physio digitalized, these are the major launches of H1 in the United States. The launching of Essilor Eyezen will bein the second part of the year in the United States.

Two major products in Transitions that will fuel Essilor, as well as our main partners, our first parties, our Transitions clients around the world. Andan E-SPF [appraisal] that will have an even better performance, because thanks to our patents, we will improve the performance and protectionagainst UVs with an E-SPF at 35 that will be launched in 2015. So here again, in terms of innovation, we have a healthy portfolio of new products.

Now if we look at our second focus, that's our engagement vis-a-vis our consumers, last year, we were telling you that we had acquired Transitionsthat the teams would deploy their synergies, everybody would use their synergies to accelerate the communication on our major brands. And thiswas done, and this explains one of the reasons for the success and this acceleration we had in Q4.

In 2015, we'll be investing some EUR200 million for consumer marketing in all our three divisions: Internet, sunglasses and prescription lenses. Wehave never done this before. Two years ago, we were at EUR100 million roughly. So we can improve our EBITDA by 24% by adding EUR100 millionof additional advertising.

This year will be at EUR200 million. We always see the efficiency of all this. It's proved. We have the same comments from the management. Solong as we can improve the efficiency on the field of our advertising investments, we will keep investing [in screens], social networks, our majorbrands. If we see that we have some weaknesses in our growth and we cannot transform enough growth, then we will reduce that amount in ourmargin. And this gives us this comfort so that we can have a good performance in the coming years. This will have an impact in terms of valuecreation, and this will be mainly seen in our revenue.

Now if we look at sunglasses, the major events in our strategy is the deployment of our brands and the acquisition of regional brands. Theinterconnection of these brands and products with [some glasses] and some filters that we manufacturer, we improve the performance. We takethe regional brands, we deploy them around the world -- I'm not going to say more because otherwise I will be doing Eric's presentation and Iwon't do it well enough. He's going to talk about all this in just a few minutes. And this is what allows us today to take a position.

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We accelerate our top line. We have the same level of margin, the same level as in prescription. And we can deploy ourselves and take new marketshares, grow our market shares that will grow faster than today, prescription lenses which are between 3% and 4% right now.

5And the fourth focus for 2015 and 2016 is to accelerate online solutions, of course. We are already the leaders in terms of Internet sales in NorthAmerica. And here again, it's the brands, it's innovation. Here again it's all our connections with the supply chain. You'll see it in a few minutes whenJean will explain this to you. You'll see how we could obtain a turnaround very rapidly in the profitability of Coastal. That's thanks to the supplychains of Essilor that is at the service of our Internet sites. And their core business is based in Vancouver in Canada. And in terms of value creation,it is an accelerator for our top line and, of course, we will take margin by selling directly to the consumers.

The fifth major lever for 2015 and 2016 is our acceleration in fast-growing markets and our partnerships, and we will base ourselves on our globalpartners. We have a very ambitious acquisition plan because the market is highly fragmented around the world, and this is what allows us to partnerwith the local leaders, this bolt-on strategy in the countries that we developed, in the mature countries some 20 years ago. This will be deployedon a quarterly basis in all the fast-growing markets.

We are opening new territories, 10 new countries where we were present in 2014, and two major regions where we will strengthen our teams inChina and in India, of course, in addition to the whole of Latin America.

Now here's an example I'd like to quote, it's China. It's a perfect example, a compelling example; a brilliant illustration of the success of our strategyin China. We can say it's almost number 2 on par with France right now. But it's a market where our activity, our business in 2014 and 2015 has gotoff to a good start. It's growing at 20%. And here, our profitability is greater than 20%.

So how come, you may say. Well, it's a unique example where we were capable in 2014, and our teams are deploying this in 2015/2016, capableof speeding up in Internet sales, online sales, by using all of our supply chain that we have in China. Also, we were capable of deploying now majorinnovations on the Chinese market where there are 800 million myopes that need our products.

And then, of course, with the Internet, well, we have the leading and the number 3 brand for sunwear. I correct myself. I'm talking about sunwear,not online. We have Bolon and Molsion with sunwear products that we're selling online. It will achieve 50% -- 20%, sorry, of sunwear sales in Chinashortly. So that's how we're growing there. 20% margin, that is very high too.

That's a typical example of the combination of this strategy and how it all hangs together. And that's the strategy that is being deployed in allcountries. But in 2014, it's true that China was, of course, the best in class.

Now the sixth leaver or driver, the major one for us, is the deployment of our corporate mission. Now the person in charge of that division is in theroom with us. He's based in Singapore, but is deployed everywhere around the world. The idea is that this is an initiative that will speed up ourprojects.

We created a fund dedicated -- a dedicated fund, EUR30 million, that is for philanthropic, so for business activities in general; a special fund to dojust that so as to roll out our mission around the world. And the fund has got tax relief from several governments around the world and severalcountries, and we would thank them all for that.

So the main thing is that these are projects that are attracting these days a lot of interest by major banks to individuals, by corporations that arehelping us, that are financially helping us to deploy our mission.

Jayanth, there you are over there. I hadn't seen where you were. There he is, Jayanth, with us in the room. So all of our teams are standing behindthis project by Essilor around the world.

And I'll give the floor to Jean in a minute, but just before that, I wanted to talk about a model that we've been using in respect of our corporatemission, by the way, that helps us to grow even closer to the consumer. The biggest problem right now is accessibility in emerging countries toeyeglasses.

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Poor vision is the leading handicap in this world and there are tens of countries where you don't have enough opticians. It's the last mile distributionthat's often a problem. And Essilor has invented a new profession. It's EyeMitra, EyeMitra in India. And we now have several hundreds of EyeMitrafunding programs by the Indian Government, several thousands. So we train somebody into refraction. He can do an eye test in his village andopen a little store; a little store, and he'll be close to the consumers and give them better vision.

That's the idea. It is the most promising grand design and big project we have among the activities pursued in respect of our corporate mission inEssilor.

So that, I think, sums up in a few words what imbues us all with motivation in Essilor; all of our people whom I do thank really warmly for theircontribution to our success in 2014 and who will continue to help us to succeed in 2015.

And I'll give the floor straight away to Jean who will talk about a couple of major topics; firstly the Internet, and then Eric will talk about sunwear.

Jean Carrier-Guillomet - Essilor International - President, Essilor of America

(interpreted) Thank you, Hubert. This is Jean. Good morning, everybody. So, indeed, I want to talk about our online business, and I'd like to startoff by recalling -- this is a slide we presented in the middle of last year -- and focus here on this business area. It's obviously a high-growth businessarea because we forecast a figure of about EUR6 billion worth for this type of distribution, online sales; by 2018, that is.

Now having said that, the projections are what they are. They're projections. But at the same time, there's a speeding up that could make us thinkthat figures will be very big here. So we've taken just a couple of examples here of major countries you have; well, regions rather; North Americaand China. And we think that the penetration of this kind of sales is 5% roughly in North America. It's 8% already in China.

And what we notice too is that when we observe other areas of industry outside of optics, you have them on the right here, in different kinds ofproducts, other consumer sectors, around 5% to 8% very often there's a tipping point and then it fast tracks after that. It accelerates strongly. That'sone point. And secondly, after the tipping point, the growth is much higher than it was before that.

So there are accelerators that kick in, and given where we are now, we would wonder if we're at this tipping point, or near it. I'm convinced we are.

And then we have technological evolutions and evolvements that are by definition not necessarily just linear, so they could further speed us uphere.

So it's a very dynamic business area, and there are levers, drivers, that are fundamental behind all of this; compelling levers that push the consumertowards this type of distribution.

Firstly, we see firstly the large population of people who are myopic. And if you want an age bracket, well, for myopes, they're very often dynamicpeople. They can be young people. You see the growth rate. And this type of distribution and technology enables us, and will enable us, to reachconsumers in emerging countries much faster than via traditional retailing means.

And also, obviously, the consumer, what the consumer loves in this kind of distribution channel, is ease of access, ease of use, convenience as it'soften called, convenience really, which enables them not just to access products easily but also recommend them -- sorry, order them and reorderthem more often.

So this is an example then of what I've just been saying that you see on the slide here.

In the United States, for example, if you take myopes, just single vision lens that is, you see here then the average consumption per consumer peryear of equipment. The base is taken as 100. That's the market average here. And you see the volumes then on the left-hand side of this screen.Look at our websites. 3 times or more than 4 times the 100 figure for the market average, the average of the industry.

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I'll tell you why. It's because consumers come back more often. They come and purchase products every eight or 10 months. And when they havesomething in their basket, well, they have a couple of things in their basket; they have not just one. So if you do the same calculation and relate itin terms of dollars per consumer per year, you see it's interesting.

Take the base of $100 as being the market average again. We're much higher on the Coastal side. Look, we're much higher than $100. AndFramesDirect as well. So that gives you an inkling into the way the market is developing in terms of volume and value creation, in terms of dollarspending per consumer per annum. Much higher in online distribution, in other words.

So this is just to convince you, if I needed to convince you, that this is a very attractive sector.

We're also very competitive in there. We've said several times that the supply chain is complicated, but we have the best supply chain in the opticsindustry. It's not just lenses and laboratories, it's also frames and distribution of contact lenses, and so on, with obviously a whole product rangethat is really broad and we can play an important role for some of our brands there.

And an important aspect is the -- what we call, the mash up, the digital, physical mash up, convergence. And we have longstanding relations withour traditional stores, bricks and mortar stores, and retailers and eye-care professionals. And then at this point in time, we're seeing this mash up,as it's called, between digital and physical sales. And you see it in the optics environment just as well as everywhere else.

We're leaders in this domain so we have a lot of accrued experience. And the Vancouver team has grown a lot in size, in quality and quantity. Andit's impressive to see them working. [Abraham] and myself were there a couple of weeks ago. And our intimate knowledge of optics consumerslocally, but globally too, because we're in lots of countries around the world, that helps us a lot. And we combine the data from the digital worldwith our consumer knowledge, and that gives us a lot of power.

So it's attractive and you're very good, they say to me. So then what about the results? Well, as you see, the results are buoyant. If you look at thetwo sides that we have talked about, EyeBuy and FramesDirect, you see the growth figures: Around 31% 2014 sales growth. 31%, 33%, dependingon the side. But the growth in the top line is very high. And then you see an improvement in profitability in 2014 too. Contribution from operationsup 65%, as you see. So behind those results, of course, there are certain initiatives, tactics, marketing, and so on.

So I just wanted to focus by way of example on a couple of things. Here we have EyeBuyDirect. It's a particular example just to grow volumes. Thisis an example of what was done. It's a traditional kind of promotion, I suppose we could say, but at the same time, it was very successful. You canup the volumes by 20% during the period of the promotion, which was Buy One Get One this time.

Then FramesDirect, this is the other website which some years ago wasn't really totally tailored to meet mobile users. It worked well on yourcomputer but not so well on your telephone or your tablet. So we changed the technology. We changed the ergonomics for the mobile devices.

And you can see now the mobile presentation is very good and we've a sales conversion on mobile devices that surged by 80% once we introducedthe new technology for mobile devices, i.e., for FramesDirect, that is, in 2014.

Another example that is one that testifies to our performance and the tactics behind all of this -- I won't go into the tactics in detail -- but this iswhere you see the interconnection, the connection with the sunwear we talked about and the online sales. A company like Bolon that already inthe course of 2014 exceeded 10% of their sales online, and 10% that was achieved by a more than doubling of the online sales. So the rate ofprogression here is really substantial. We think it will be even higher in 2015.

So I want to talk to you a bit more about Coastal. There's losses been done. There's more being done for the last eight or nine months. We've talkeda bit about Coastal. We've been doing a lot of things, fundamental changes in the supply chain. And also, we're supported by an extension of thelaboratory we had in China, that was serving EyeBuyDirect. Now we have a lab dedicated to this kind of activity. It's very efficient to do it, and itnow has the right size to meet Coastal's volume requirements.

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Also, we've a new interconnection supported by highly-performing laboratories that we have in the core business of the Group in Thailand, so it'sjust serving certain countries and certain products. And we use our supply for contact lenses. So a lot of work is done with Essilor teams on thesupply chain to achieve a good performance there.

Also, we change a lot of things in our marketing efforts. Our marketing has -- we're very emotive about this, but it's mathematical too. We've madevery rational marketing choices, we think.

We've rationalized marketing efforts in Coastal.com, and there were technological changes brought in too. Here we've adapted sides to meet allthe needs of all mobile devices, smartphones and tablets, and so on. And that's underway and it's progressing well. And certain brands of the Grouphave been introduced. Transitions was there for a while, and Kodak and Polaroid will follow suit in 2015.

And based on the country in which we want to deploy ourselves globally, and the most important element in 2014 was the setting up in China ofa dedicated team. They're focusing on the very strong growth of this type of distribution in China, but we have multi-country development plansthat will keep being deployed in 2015.

And when we look at multi-country, we see quite a number of bolt-on acquisitions possibilities. There are a certain number of them. So conversions,we're going to launch this on all the continents, digital online service for all our partners, opticians, so that they can benefit from all that I've justtalked to you about. I'd just like to briefly recall that we had some stores that were not profitable and so we have divested from them.

So if you look at our ambition by 2018, the turnaround of Coastal, well, when you see that the profitability in Coastal in January was break even,not bad after nine months. We still have some synergies to set up. There is a team and the foundation is really solid so that we can have dynamicand profitable growth.

So 2014, we had break even. 2015 we expect growth for all our sites, and especially Coastal. And now we're going to make the best of our supplychain effect, size effect.

Consumer marketing, that was streamlined, international development. And here, we expect a positive contribution in 2015 of Coastal and theentire division. And this comforts us. We think that we can reach EUR500 million and a profitability of 10%/12% by 2018.

Thank you.

Unidentified Company Representative

(interpreted) Thank you, Jean. Good morning to all of you.

Last February, we had presented to you our ambitious strategy for sunwear based on three verticals: The setting up of brand portfolio for performancesector, mid tier, multi-channel, multi-price. We wanted to strengthen sunglasses for our own brands and the service of the industry. And thirdly,we wanted to base ourselves on Essilor, marketing, R&D, prescription, Internet, and the globalization strength of Essilor.

And today, we are on line with this ambitious objective with a growth in sun lenses of 3% in 2014; solid growth in our two segments, sun lenses,prescription and plano up by 6%, driven by polarized prescription lenses, mirrors on plano lenses and the integration of Polycore.

Sunglasses plus 79%, and what is even more significant, what is important for us is a strong like-for-like growth in our two acquisitions: Bolon, plus20%, Costa plus 15%, and FGX. You know that it was a difficult year in the United States, because of the inventory draw-downs in the drugstores.But we remained optimistic in this drugstore channel. Why? Because they are leaving a certain number of categories, CDs, photo development. Sothis is going to free space for us, and they want to develop in health, healthcare. So this opens some nice perspectives for optics. And FGX did verywell in Europe and Latin America with a double-digit growth.

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So we're on line with our ambitions, and we're going to rebalance our sunwear portfolio based on premium markets, China and USA, towardsfast-growing segments; strong currencies too.

And the other topic of satisfaction is the successful integration of our new acquisitions. Costa acquired the Satisloh machine so they could enter-- in-source their coating work. And now, they have a Shamir design so they can provide the best solar performance prescription solar lenses forthe consumers. The price will be divided by 2.

And we have accelerated our expansion in the United States. We only cover 50% of the United States. And the teams were very successful in thenorth east. This is where we have a lot of consumption of solar products in the United States.

Same in Bolon. We have in stores the plano sun lenses. We have sourced them at Polycore. We have strengthened our portfolio with the Prosunbrand. And the teams have worked with Essilor China to prepare for the first time a prescription offer that will be available on the market in Q22015.

Polycore, we have strengthened the capabilities of our manufacturing plants in Malaysia and Indonesia. We have improved the yields and productivitythanks to the knowhow of Essilor, and we have strengthened the plano sun lenses range. And all this with, at the core of this strategy, thestrengthening of the new sun lens quality standards.

So innovation in prescription sun lenses. We've launched the gradient polarized lenses. So the entire performance of polarized sun lenses are,therefore, women's sunglasses.

We have innovated a lot in plano sun lenses. We have strengthened our technology, mirror technology. If you have children, you've noticed thatsun glasses have a lot of mirrors. We have strengthened the performance of our anti-scratch lenses. And we have a comprehensive offer in termsof material, polycarbonate, Trivex. And we also have a made in Italy, which is very important in the fashion business.

And there is the will to have online education, the importance of the lenses, when you choose sunglasses. And we have education sites like Eyezenthat explains how important it is to protect your eyes, our eCommerce to educate people on polarized lenses and the strength of our brand sites,Costa and Bolon, to teach about their own lenses and put pressure on the market on the importance of the quality of the lens.

So all this allows us to have an aggressive and ambitious approach for 2015. It will be based on four verticals: Innovation; strengthening the brandequity; geographic and channel expansion; and finally, the acquisitions and partnerships.

Now as for innovation, we are basing ourselves on three verticals. Innovation means improving lens performance. So what are we doing here? Weare cascading the UV technology that we have put on clear lenses, solar lenses, prescription and plano. That means that we can offer consumersan eye-sun protection factor of 50. We've strengthened our ability to deliver mirrors, which are original and innovative. We've strengthened thedesign. Shamir has launched Attitude III special solar, which is good for all kinds of designs of fashion sunglasses, curved sunglasses.

With all these innovational lenses, we have strengthened our offer in terms of our styles. We have new iconic styles with our brand Bolon. Theextension with Costa, which was very masculine, now we have feminine designs. We have life-size Coastal for those who live by the sea, whetherit's for men or women.

Innovation at the point of sale, here you have the promotion of FGX at the store, and the consumer for EUR12 can obtain sunglasses -- he can adaptthe branches and the front frame of his glasses. So versatile sunglasses, very trendy at an accessible cost.

And at the core of this innovation, the lens is, of course, there, and we're going from a prehistorical lens with four layers. Here you see the lens front,surface scratch resistance and tint coating, and we're adding more technology. We can have anti-smudge, anti-dust. We can add an effectiveanti-reflection on the front and the back. We can add a mirror effect for sports lenses. We can have anti-fog. And we can recommend going froma tint lens to polarized lens. And that guarantees the satisfaction of the consumer.

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And we create value. We're going from four layers to 25 layers. So this is a creation of value and this is customer satisfaction.

The second part; strengthening our brand and our brand equity. First, the portfolio Prosun is the second Chinese brand behind Bolon; 60% brandawareness, very old brand. Right from the moment of acquisition, we changed the logo. Here you see the new logo at the bottom which is moremodern. But they are the leaders in China in frames for children and just a very strong brand for the male segment.

So Bolon Prosun, that is leadership in China in women, children and men on what is going to become very soon the leading market in solar andsunwear.

Reinforcing the equity of our core brands, Essilor is at the service of its partners and brands. Costa's new ambassador, the country singer KennyChesney. We're going to strengthen our partnership with various universities to create this emotional link between the brand and young people.

Foster Grant is exported outside of the United States. We are creating the Foster Grant signature which is more mid tier. We're going to reinforcethe marketing means. And in India, you see we have signed with Sonaksi Sinha, who is one of the top five Bollywood actresses to support thelaunch in India.

Molsion, which is young, vibrant brand in our Chinese portfolio, we have two celebrities, [Ziang Zhou Ming] and [Yung Mi], movie and TV actors,very well-known in China.

And of course, our flagship brand Bolon, I talked about the new style, an iconic style, different style. And for this new iconic style, we had to havea charming and powerful ambassador. You might have seen this. We announced this. We signed with Sophie Marceau. The Chinese call her thelittle Chinese rose. And for the past 15 years, she goes to China for certain events, partly for the Chinese Government, so is very famous in China.And beyond her fame in China, Sophie Marceau is going to become our brand ambassador and we'll be able to make the brand more international,give it a global dimension there for Bolon.

So now, we're going to look at the advertisement which is going to begin early March in China.

(video playing)

My Paris, My Bolon. With Sophie Marceau's voice, it sounds lovely. We'll hear it again.

(video playing)

So our brands, both (inaudible) of our brands, second main focus is -- or third, rather, is the geographical expansion and our channel expansion.Travel retail; we've just introduced actually the Bolon brand to DFS, which is a leading player in duty free in Asia, DFS.

So Bolon, now if you travel around, you'll find it in Hong Kong airport, in Singapore, in Bali, and [Guan] (inaudible). So five major cities in terms ofChinese passenger traffic. Then we're with King Power in Thailand and the leading player in duty free in Korea, two other countries where theChinese passenger traffic is fairly high.

So apart from Bolon, we're expanding in duty fee also with FGX. That means that Foster Grant is expanding to encompass other kinds of stores andairports. Here we see the relay store selling newspapers and such like, and glasses, of course, in the Czech Republic.

And of course, with the Internet, online distribution, more than 10% of our sales now for Bolon and Costa on the Internet, thanks to our eCommercesites, thanks to all the efforts being put in by the Group.

Thirdly, geographical expansion. Costa is starting to expand further into Canada, and you'll see then other countries too. Foster Grant is setting upactivity. You've got France, Spain, Reebok. You see Foster Grant in India, and so on and so forth.

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The last driver is acquisitions and partnerships. Acquisitions, as you heard, very targeted ones in terms of performance at all price levels and in theentry and mid-tier segments with a clear priority around Asia, Latin America and Europe which are, all three of them, continents that have greatgrowth in those segments.

Then secondly, commercial partnerships. All this discourse about quality of lenses resonates a lot, and we've more and more meetings these dayswith brands; not with the purchasing people, but with the development and marketing people who want to integrate lens into their brand strategy,branding strategy.

And we're there to help with the technology for plano and prescription lens, but also the services of our 400 laboratories around the world. Andalso, we want to provide them with turnkey solutions for supply chain, integrated supply chain services.

So lots of talks going on. Lots of commercial partnerships being talked about. And we should enter into strong partnerships shortly so as to bolsterall of our messages about the quality of the lens.

So all of this basically boils down to saying that we're very confident concerning our ambition. The EUR1.1 billion in 2018 is within sight, we think.We confirm organic growth of more than 7%, like-for-like revenue growth of about 7%; total revenue growth with acquisitions more than 10% for2015. And as you've understood, we hope to create value thanks to all of this interconnection we have between our historical knowhow in Essilor,our knowhow with online sales, and somewhere as well so as to lock in profitability that would in the high teens; in the high teens somewherebetween [15] and [20].

Thank you.


(interpreted) Well, very good. Thank you. You got the really nice sunwear topic to do. We will have to fit it up with others the next time because itwas a very, very interesting sequence in our presentation this morning. Thank you.

So next, we wanted to talk just briefly about the fact that the major driver, one of the major drivers rather for 2015 will be the way in which we'llbe capable of fulfilling and executing the deployment of EUR200 million of capital expenditure for our major brands with consumers. And I'll showyou a little bit of what we did in 2014, how we want to do in 2015, and then we'll talk about the guidance. So we'll have a look at that now.

(video playing)

So you've understood that this strategic redeployment is going on by innovation via geographies and, of course, the speeding up towards brands,the mass market, the public at large, consumer market and, of course, focus on every one of you, there's 7 billion people who need to look better.

Now our Essilor team is committing to what for 2015? Well, to this, this is it. As you heard, like-for-like growth that should speed up half year byhalf year, year by year. And for 2015, it will be higher than 4.5%.

Now here on my left, I hear somebody saying 4.8% is greater than 4.5%. And somebody on the right is saying 4.1% is also greater than 4.5%. Wesay it will be greater than 4.5%.

So overall growth, that will be between 8% and 11%. It will depend on acquisitions and the timing, the pace; also, the acquisitions. So that's excludingcurrency effect. And the margin continuing to grow, to get better, because it will be greater than or equal to 18.8%.

So the most important thing on this page, which is number 82, is not the figures. It is the sign greater. That's the only one to be borne in mind.That's the take-home message.

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So now we said that we would take questions after our presentation, but as we have 58,000 people in Essilor committing to all this, we'd like youto commit also to something; to protecting your eyes, protecting your vision, and this you are purchasing a new pair of eyeglasses or sunglasses.

So we will now take your questions.

Q U E S T I O N S A N D A N S W E R S

Unidentified Audience Member

(interpreted) Berenberg. I have three questions; well, two on online sales.

The first question concerns the fact that given that you seem to have volumes that are growing strongly, you're using Essilor distribution channels,you have figures higher than the average in volume in value terms, and you're prudent in terms of your profitability objective of 10% to 12%, thenwhat about selling progressive lenses online? Would that be possible? Can that be done efficiently, I would ask you?

And another question has to do with organic growth, like-for-like growth. Any indications about the organic growth for lenses, the lens businesses;maybe for North America where [sun] comes in with the EyeMed contract? And how would you see that trending in the future?


(interpreted) You're talking about in general, not the Internet?


(interpreted) Yes. Organic growth on lenses, I mean.


(interpreted) Okay. Well, I'll give the floor to Jean to talk a bit about the online sales. And then I'll give the floor to Laurent about the organic growth,if you like.


(interpreted) Let's talk about the Internet first, if you like. Well, I don't know if we're prudent, but we also need to fund a few of the growth of thisbusiness area in a general way, in a global way, because there's capital expenditure to be done after all.

And it's true that once these activities are well established in the market, we could think that's all right. But then there's a whole lot of [conquering]to be done as well with capital expenditure. So we maintain a figure of 10% to 12%, and you see the growth is with us a bit more than what wealready expected. So it's a market that's very dynamic and buoyant.

And on the progressive lenses online, there are a couple of things to be borne in mind. Firstly, there's a lot to be done with people who don't useprogressive lenses, people who are myopes, and so on. So that is there to be -- that potentially is there to be leveraged. There's a whole populationout there of myopic people, and there are a lot of them to be served.

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Also, we think for the moment that in the main for progressive lenses, the technology isn't there to do things really well. And there are progressivelenses sold online, all right, and we think that for the moment it's not quite the way to be. So in the medium term, we'll see, but for the moment,we're focusing on lenses for myopes in online.

So that's why you won't see Varilux on online sales because the technology isn't there to do it, and this product is for opticians, optometrists, andthey're the only people who can guarantee consumers thanks to their service and their professional capabilities that these progressives areprescribed well and fitted well on frames.

And on the profitability side of things, what Jean has said and what the Vancouver people do is -- we believe what they've said and done is showthat they believe in growth. But their [wager] is growth straightaway for revenue. Profitability of 10% to 12% won't dilute the Group because we'llhave the synergies being tapped into, but we would say 30% growth for the top line.


(interpreted) I won't give you precise figures but some indications to help you, and I'll talk just about organic growth, just organic growth; set asidethe acquisitions then.

So what we see on the mature markets, we're talking about Europe and North America, Japan, Australia. What we've seen, what we've forecast issteady growth compared with 2014, just flat.

America, well, it comes back to a more levelized, normalized level, and a bit of acceleration in Europe. So the two combined give us about the samebehavior. Something between 2% and 3% on those mature markets, we would say.

Then on that fast-growing markets, we're above [10%]. It varies from one country to another. It could be a lot more than 10% in India and China,on 10% to 12% in Brazil, and then you see that's what we were aiming at for 2015. And we must add bolt-on acquisitions to that. In fast-growingmarkets, we should have a combined level of above 20%.


(interpreted) Thank you, Laurent. Another question over there maybe?

Stephane Sumar - Natixis - Analyst

(interpreted) Stephane Sumar, Natixis. I have a few questions, please. Could you tell us the Transitions revenues figure with third parties? I thinkthat's an issue that we would like to know about. It's got quite a bit better over the last number of months. And what's the mood of your partnersin that area?

Also, another question, a more general one is: Are there other things that could lead you to come closer to consumers apart from advertising? I'mthinking of distribution. Could that be a way forward?

Also on sunwear, the breakdown between the lenses and the glasses. You give us a general figure. Could we have the breakdown, please?

And last question is about your -- you've talked about you're bouncing back a bit; well, getting back to better times. What areas and what drivers?

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(interpreted) Well, Stephane, these are demanding questions this morning. Okay. Well, on Transitions, yes, the brand is strong. The brand is supportedby, as you've seen, advertising. And of course, that drives all of our networks. It drives all the subsidiaries of Essilor too, and it drives demand withthird parties that is longstanding clients of the Transitions company, other lens clusters. So that's grown and it will grow, but we can't give youamounts of money, in money terms. But it's going well. The brand is strong.

So there is a question that you asked about sunwear. Eric will answer that, and [Paul] will answer the one about your question about consumers.

What we're interested in, as you've understood, is the 7 billion figure. Now we can reach them via the Internet, via online sales, via stores, or whatever.What we're interested in is providing better vision to all those people who need it at the best possible price by all means.

Now if in certain geographical areas we have to go closer to the consumer by having a brick and mortar building around our glasses, well, that canbe done. But it's not our strategy really. Our strategy is to improve people's vision. People who need eyesight improvement can be helped by usby whatever means available.


(interpreted) Sunwear, you showed us figures -- you asked us about those figures. Last year, we said 40% to 45% on lenses and 50% to 55% wasthe figure for the actual glasses and frames. 45%/55% probably now. The glasses are growing faster and the mix will change. That was Eric's answer.


(interpreted) You've noted the progressive acceleration over the year, the good fourth quarter in Europe. I'm really admiring Bernard and his teams.The economic environment is not an easy one, and in this economic environment, with these products, very creative media campaigns, very efficientcampaigns with partners were multiplying, and by acting with a multi-network in each and every country, the teams are maintaining and developingthe positions.

xx

Now geographically, we have a very good performance in the south. The east has re-accelerated. The UK has a very good performance. We alwayshave some difficult markets in Scandinavia, Benelux. Germany is going back to growth. It was a flattish market for us and now it's doing better.

And in France, with this regulatory environment that has stabilized, we're using all our strength with all the Group's networks. And UK, well, UK isdoing well. UK has a very good performance as in the last three years.

Claremont James - - Analyst

(interpreted) [Claremont James]. I have three questions, if I may, the first on your marketing budget. You are splitting it in one of the slides, well,the slides on the strategy. In prescription, can you tell us which is the share of Transitions? Because you would communicate, excluding Transactionsnow, we have the budget with Transitions. In 2015, you've shown us advertisements with a lot of brands. Now what are the most structuringprojects? What are the consumer marketing projects? What will be most structuring in 2015? That's the first question.

Second question, I would like to address it to Laurent. Considering all the evolutions, the business mix of the Group, how will the CapEx evolve,compared to the sun line? Is there going to be a slight change; something different vis a vis the CapEx? What will happen in the midterm?

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And the last question. We were told about the dollar effect on your margins, and you would always say it's neutral on the margins, not on therevenue. You'd always say it is neutral. Now because of the change in your business and the acquisitions, the mix of acquisitions, can you help usa bit? Is there an effect now that wasn't there before?


(interpreted) Well, Jean, you can start answering regarding marketing.


(interpreted) So as for Transitions, they are part of the total. It's roughly 10% of the total. Roughly, okay?


(interpreted) The structuring operations, you have to look at each and every division. I talked about this in the online division. There are things thatare changing. Eric showed that there are new structurings.

As for green marketing, we are focusing on the very good execution in 2014. We are increasing consumer marketing expenses, the lens marketing-- that's our top line -- and the construction and this important link with the consumer.

And behind that, with the new products, we're launching a new category. I think you've understood this. This product is addressed to everyone,people who are not wearing glasses today. Eyezen is very good for those who don't wear glasses. It's also very good for the myopic and [pre-myopic].

So we have a certain number of innovations and new products, and the major marketing communication point is the [exploration] and the properexecution of consumer marketing.

And in terms of the geographies, the major part of the budget is in North America and Asia, of course, because we have the Internet part, solar;Varilux, Crizal in North America; and we have Bolon, solar in China and Asia. And of course, we have Varilux Crizal/Crizal Varilux.

And the dollar impact in the margin, well, the profitability in the dollar zone is quite close to the Group average. So we do not anticipate any majorvariations in terms of the operational contributions from operations.

And CapEx. Well, we're thinking about this in 2015. We're quite comfortable we will remain in this guidance between [4] and [5]. There are a lot ofdiscussions. Some are contradictory.

As for solar, there is start of marketing investment, of course. The supply chain is -- we have lenses. It's also good for Internet. And we should seea slight drop in the fact that this is capital intensive in this sector. We'll know better in a year from now because we're just discovering; we're learning,we're discovering. We do not know everything. And as we learn and study this, we will let you know more. But 2015, we are [stretching our boots]on this topic.

The interconnection of businesses are such that we can deploy Internet and sunwear by basing ourselves on the investments made in lenses inthe supply chain, so there's a very good optimization of all of the past investments and the present and future deployment of sunwear divisionsand Internet.

I'm sorry. A question was put off mic. We'll see if the facts will -- a certain reality.

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Antoine Belge - HSBC Global Research - Analyst

(interpreted) Antoine, HSBC. Three questions regarding the margin objective for 2015. You're saying we shouldn't look at the figures that much.I've understood that the communication budget will increase by some [EUR43 million]. That is 60 basis points more than in 2014. However, theacquisitions are dilutive. For this year, there should be -- the previous acquisitions like Coastal should contribute positively. So what are the differentdrivers of this guidance?

And I'd like to know if the increase in the dollar has influenced the amount you'll be spending. Because you said that historically, 9% in the top linein terms of profits, it's quite rare to see that. So therefore, have you decided to reinvest in this part of -- this growth in profits in communication?

My second question is for China. You said China was as big as France. If you remember, we went to China two years ago. That was only 2% then ofyour revenue. and how much have we reached now for China and France?

And since we're talking about France, this is my third question, Paul talked about a stabilization in regulations. Can you tell us more? Do you expectsome negative effects in 2015 since that won't be refunded?


(interpreted) Paul will answer about France. As for the margin, [18.6%] that we announced a year ago without the strategic acquisitions. We did --with the strategic acquisitions, we're announcing 18.8% minimum for 2015.

Don't push us too far. You want growth. There are 7 billion people who need to be served better for their vision. This is what we're doing. Themargin is falling, as you can see, and it will keep falling. We are quite penalized, Laurent showed this to you, by the IFRS, the lawyers, the [accountants].Normally, our margin should be at 20%. All these people are affecting our margin. We integrate them each and every time.

And, yes. You've calculated it yourself. We're going to invest, spend EUR200 million; [EUR43,000/EUR50,000 plus] more than last year. That's sometens of basis points, if you calculate. And if one day we suddenly realize that we're not efficient with advertising, we'll put it down in the margin.But that's not what's most important. What's important is this adventure we're experiencing together, our performance which is improving andthe improvement of the eyesight. But don't push us too far on all this.

France now. What I wanted to say about the regulatory environment that it has stabilized now. All the decrees are out. All the refunding rules havebeen determined for the complementary health insurance. So there was a lot of stability at the beginning of the year. That's an important fact. Andthe market at the end of the year was slightly better. December in France was slightly better than what it was compared to the rest of the year.

And the Group, as I already told you, has wonderful assets in France to address all the market needs through this multi-networking. We are goingto deploy our innovations. We're going to keep conveying this message about the quality of vision.

You saw this advertisement, Qualissime Varilux. It's very important what Ludovic has done with his teams to show that it is important to have asecond pair of glasses of good quality. A second pair, it's very important in France. And sometimes it is not useful. It is not good quality pair ofspectacles. But now we are showing this message that it is a pair of glasses that should be of good quality.

And then we have large key account partnerships, as we did it successfully in Spain and the UK. There's some interesting things happening inFrance too. And in this new field, we are using the Group's multi-network.

I'll take an Internet question before we go on with the questions in the room. It's a question for you, Jean, an Internet question on Internet.

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Michael Boyd - Ben Capital - Analyst

(interpreted) Michael [Boyd], [Ben] Capital. Have you received any negative reactions after the deployment on Internet on the traditional networks?What are your intentions? How are you managing conflicts between the different networks?


(interpreted) It's buy online, which is the answer. But, there are several aspects. The first thing; we are in 2015 today, and most of our clients haveunderstood the importance of this technology and to take part in it. They know that it is arriving. We have services that will allow them to take partin all this. And when you calculate, half of the growth in any domain is based on Internet. People understand that they cannot stay away from itand they're happy to see some solutions on Internet.

Now the majority on this issue, it is not there everywhere in all countries, so it requires a lot of investment, communication investment. But we'reclose to these people with all our vendors, customer services. And when people ask us questions, we go and see them; we answer their questionsand it goes off well.

Yes. And as I said, on Internet, you cannot find our progressive lenses. Customization is dedicated to the traditional networks of opticians andoptometrists.

And thirdly, as we were explaining, the key to success on Internet is the supply chain, and we shared the supply chain with our clients. In the UnitedStates, in Canada, Jean's teams, they sell the services of our supply chains for all the opticians and optometrists who want to have an offer online.So the market is growing and, finally, everybody is happy because everybody finds what is interesting for him.


(interpreted) There's another question here in front of me.

Alex Kleban - Barclays - Analyst

Alex Kleban, Barclays. First one is: Can you update on the deal pipeline for this year and maybe looking into next year? And very specifically, howmuch of that deal activity should be emerging market versus developed? And then when we think about the EUR2.8 billion target for 2018, do wesee most of the progress toward that this year or next year? Or is it more back-end loaded in terms of when you do acquisitions and when you seethat growth?

And then just another quick follow-up on acquisitions. You talk mostly about bolt-on. Strategically, are you in a position in the next 12 to 18 monthswhere if an opportunity came up for a new market, market segment, to do a strategic deal, would you consider it?

And then, sorry, big question. And then just quick on readers, a very quick turnaround there for the FGX. So maybe just to give some more coloron what was done. You talked about launching a new collection last quarter, and also obviously the stocking. So just to get a sense of that.

And very last question. Very sorry. I've asked four, I think. But [it's] Grand Vision. And with the IPO there, we've heard a lot of discussion aroundchains, around the impact of chains on your business. Can you talk historically about how chains have impacted you as Essilor, either margins,price, volume, and what concerns you might have going forward?

Thanks.

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(interpreted) Yes, Laurent, I'll pass the question on the deal pipeline on to you; and, Laurent, you'll answer that. Then I'll cover the bolt-on question,and the EUR2.8 billion readers you can take. And I'll ask Paul to talk to us about the key accounts, the other question and the benefits of key accounts,and so on, for us.

Now the due pipeline first, Well, yes, our strategy for small acquisitions in villages, large towns, new countries, that's continuing. The market is veryfragmented, very fragmented. The market was already fragmented with [EUR11 billion] with just eyeglasses, and then it became [EUR27 billion],sunwear and Internet. It's even more fragmented.

So you will see in the coming half years, month, weeks, you will see a large number of acquisitions coming in?

Last year, our teams focused on large deals quite a lot, and for the start of this year, it will be more small deals; lots of small ones rather than bigdeals. But we can't say it's back loaded or anything like that. No. It's just ongoing, continuous.

The objective of EUR2.8 billion is the same thing. There will no doubt be -- I'm not giving away any secret here -- there are lots of small acquisitions.And then in the quarter, there will be a big one and it will be a quantum leap forward, and so on and so forth.

So right now, the timing for signature of such deals, it could be three months, it can take six months, it can take a year. You've got to do lots offiling with the different antitrust authorities. You've got to go through the paperwork and through the questions, and so on. And it's the ChineseNew Year at the moment, so it's harder to get answers on deals in China. It drags on like that. So we can't say that it is front loaded or back loaded,really.

Then readers. Eric, maybe you could answer that one. Eric?


(interpreted) Yes. On readers, that's the FGX division, we've got to address sun and readers together because there's total synergy commerciallyspeaking between the two segments in terms of points of sale. All of the business model, when it comes to supply chain out of China, merchandisingin stores, it functions because you've got sunglasses and readers.

Now on sun, sunwear, we've seen that even if sunwear in the US has suffered from inventory draw down, there has been a rebalancing because ofour sunwear portfolio, you've seen the US when it comes to performance, China and so on. So on readers, we didn't have acquisitions that wereas powerful and equivalent.

But the strategy remains the same. So we're getting off to another start now again in the US. We've just renewed three contracts; two with bigdrugstore chains and one with big hypermarket chain. And one of the drugstore contracts concerns seven years. It's over seven years. We haven'tdone that in the past. We'll go into details once it's signed, but we're quite confident about that. And it's an extension of our space, so to speak,within readers that's happening. So we're bolstering the fundamentals over in the US.

And the policy is to accelerate our readers' ranges in the emerging world. And even in readers, Europe is an emerging continent because it's notas structured in terms of distribution channels and the offerings. It's not structured the same as US is. So reinforcing the fundamentals is what it'sall about in the US.


(interpreted) Well, the key account partnerships, [says Paul].

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You've been seeing for three/four/five years now more and more the development of multi-annual contracts with major players in the industry.That's in Europe, in the United States. There are other examples we could go to. But it's rather something that's strengthened because -- it's beingstrengthened because the players with which those partnerships were entered into have good performance levels, and the idea is to free up theirenergy so as to enable them to do their jobs.

So what do they ask us for? We've talked a lot about supply chain already. The supply chain in Essilor is a real strategic feather in our cap and theywant to be underpinned by that. So we've an agreement with Boots, and for all of their 700 stores in the UK, they've entrusted us with all of themanagement from the order right through to the delivery of a pair of eyeglasses to the consumer in the store, they've entrusted us with a lot ofresponsibility.

And in the United States, we're being asked to deploy all of the Satisloh technology. That's the designs of our Group, all of the quality assistancewe have. You heard about that last August. Costco has entrusted us with important things; the technology that enables us to come up withinnovative products.

Then in Spain there's a contract, a multi-annual one, that's a mirror of the Boots one. It looks like it. Walmart uses Nikon Eyes, a big brand of theGroup. And in order to trade up in their stores, to have a high quality offering, for progressive lens, they use our Group's products, and they'redeploying that in the Walmart stores. And then there is even consumer advertising being done using the brand to speed it up.

So Eric has talked about the readers division and he talked about the multi-annual contract, the large one that we're negotiating at the moment.And so there's a pipeline there, so to speak, of partnerships that our teams are working on because the Group has developed knowhow. And wehave project teams and commercial sales and marketing teams who region by region are working with these big players.

So it's knowhow and capability that -- our key accounts are coming to realize that we have this capability more and more.

The margins when it comes to chains, for organized distribution in percentage terms, that margin is as good as anywhere else. Then it's up to eachmajor chain to offer more sophisticated products, or what. It depends on their strategy. More discount-focused chains will offer less expensiveproducts; won't change the margin percentage. Other chains will want to be on a par with the quality provided in opticians' stores, so morehigh-ended value products is what they want. So the absolute value of the margin is stronger but the percentages are the same. So it doesn't reallyaffect the percentage as such.

Then you have chains that have different strategies; ones that want to remain behind the scenes, others that want to showcase what they do, andso on and so forth.

Other questions from the room, perhaps?


(interpreted) I'm from BPI. I just want to ask three questions, please. Firstly, your media spend. Could you tell us, give us some idea of the paybackyou have? And do you think it's going to ramp up in the coming while? Is it something you've built into your objectives and guidance for 2015?

Also, on the media spend compared with the competitive environment, it's quite innovative to talk directly to the consumers for prescription lensin particular. So are your competitors making a move on that? Do you anticipate they'll start to do something similar to yourselves?

And then still on the competitive environment, more to do with the emerging countries, the fast-growing markets. Traditionally, when we're talkingabout competition, it's Hoya that's involved. So could you talk about your competitive environment in Brazil and China and the more emergingworld? Is it totally fragmented still, or have you got big players opposite you in those countries like you might have in the more developed markets?

Thank you.

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(interpreted) Maybe Laurent here on my right could talk about the payback. That's not an easy one maybe.


(interpreted) No, it's really simple. You've understood that the media spend has been sped up because we've reallocated in fact spending that wasspent in a certain way in the Transitions organization, and the synergies we have generated enable us to spend that money differently. So there'sno impact on the P&L. That's why we're fairly aggressive about investing. And for the moment, what we've asked our teams for in 2014/2105 is thatfor $1 spent or EUR1 spent on media, give us at least $1 of sales or EUR1 of sales.

So given that the media are developing with high-margin products, we know that it's positive in the -- the end result is positive for us. So it's assimple as that for the moment.

Well, obviously, our marketing department will be keeping their eyes riveted on what goes on, and they'll be -- we've very good people and they'llbe devising all the best methods to be used as the situation develops. And we'll be having focus groups and whatever.

Well, the thing is we had a second half last year that was better than the first half. That fact is partly due to the aggregate effect of the payback inall the forms of the media spend.

And, Hubert, you asked another question about our competitors. Well, in a way, let's put it this way. In 2015, who are our competitors? Well, whenyou purchase a new tie, that's our competitor really. When the lady at the back of the room buys a new handbag or a watch, she decides to spendEUR300 on one of those items, that's our competition in 2015, I think.

In France, in America, it's the same way, and in the emerging markets it's the same thing. There are the choices that people have to make.

Justin Morris - Citigroup - Analyst

Justin Morris, Citigroup. The question on the payback in terms of the marketing expenses. Do you see a big difference between the payback youget on online marketing versus offline marketing? And how do you think about investing into social media and those kinds of forms?

And then my second question was just another way of splitting your bolt-on acquisitions. How will that be split between the lens business and thereaders and sunglasses business? And also, how will it be split between more physical businesses like manufacturing versus online distribution.Those are my questions.


(interpreted) Laurent, you'll answer on the bolt-on acquisitions and I'll answer on the payback.

But the answer is, yes, of course, the payback is different between online and offline, obviously. It's not the same payback. Payback on online ismuch, much higher than the payback when it's offline.

The two are very important and substantial. We're investing EUR200 million after all. But we're devoting quite a lot to online by all of our clients. Imean it is, yes, there is a big difference. It is right that there is a big difference.

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(interpreted) On the bolt-ons, we don't reason in terms of one segment against another. In lenses, there's still lots of countries, more than 100,where we are not present there. And an efficient way of entering a country is by partnering with one or several leaders in the country.

There are countries where the market shares are small, and there are efficient ways of improving our market shares and developing access forconsumers of our products, and access for opticians. You can diversify your offerings via partnerships, and that's what we're doing and continuingto do everywhere, at the moment, a bit more in Latin America maybe and in Asia. But as we said, there are still interesting targets in North Americaand in Europe.

When we look at sunwear, Eric talked about this, he looks for two things. He wants to ally with powerful brands, mainstream brands, in countrieswhich are in Latin America or Asia or, yes, roughly in those regions, and acquire distribution capabilities, distributors that he will be able to besupported by for our existing brands and readers. And that's what's going to happen there.

And then online sales, it's early days yet, but I'm sure there will be lots of players in different countries that would be developing quickly that mightbe worth -- it might be worth our looking at to work with them.


(interpreted) Any other questions from the room? If there aren't questions from the room, well, then, I'd like to thank you for coming, and pleasekeep your promise to protect your eyes in 2015.

Thank you very much, and see you at the cocktail reception in just a minute. Thank you.

Editor

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by theCompany sponsoring this Event.

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