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H1 Report June 30, 2014
Investors presentation
August 28, 2014
Confidentiality This presentation has been prepared by Marcolin S.p.A. and its affiliates. The information contained herein is confidential and has been prepared solely for the needs of the adressee and is not to be relied upon by any other person or entity. Hence, if you wish to disclose copies of this report to any other person or entity, you must inform they that they may not use these reports for any purpose without Marcolin written consent. No representation, warranty or undertaking, express or implied, is made as to, and no reliance shoud be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein.
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3
At a glance
Key consolidated financials: H1 2014
Viva Integration Project
Agenda
Appendix
Key consolidated financials: LTM
At a glance
* EBITDA is affected by a number of extraordinary items. For this reason it has been adjusted to restate the one-off effects deriving from the re-organization as
represented in “Consolidated Adjusted EBITDA” page.
Sales Consolidated Net sales increased +2,0%, thanks to a significant upside from TF
and a good performance of TB and DL. In terms of Markets 2014 H1 has confirmed
the expectations of sales improvement in Europe namely Germany, Spain and Italy.
At constant FX sales increased +4,9% vs. PY.
194.3 Million EUR
EBITDA 2014 H1 EBITDA Reported is € 21.2m (€ 19.9m previous year).
2014 H1 Adjusted EBITDA* (excluding one-offs) is € 24.1m in line with previous
year.
LTM Adjusted Run-Rate EBITDA for 2014 is € 46.9m, compared to LTM Dec 2013 of
€47.8m. The difference is mostly due to a negative fluctuation of the exchange rate of the group currencies.
H1 24.1 12.4% On Net
sales
Net Debt
199.9 2014 Constant FX
4
Consolidated Net Debt as of June 2014 is € 175.5m (€ 166,2m end of
December 2013) with a cash absorption of € 8.3m mostly due to seasonality
of the business as well as non recurring payments.
The ratio Net financial position to LTM Adjusted run-rate EBITDA is 3.74
Million EUR in 2013
190.6
3.74 NFP /
Adj LTM RR Ebitda
LTM 46,9 13.4% On Net
sales
175.5 Million EUR
5
At a glance
Key consolidated financials: H1 2014
Viva Integration Project
Agenda
Appendix
Key consolidated financials: LTM
H1 Consolidated Sales 194.3 million EUR
2014 H1
@ const FOREX
+2% vs PY
Global sales By market destination
199.9 mill EUR +4,9% vs PY
6
North America
Europe Asia
RoW
73.8 Mill. EUR
74.5 Mill. EUR
16.7 Mill. EUR
29.4 Mill. EUR
38%
38% 9%
15%
+2.9%
+0.1%*
+17.0%
* +4,4% costant forex
-2,9%*
* + 1 % costant forex
Summary P&L
7 7
Key Financials: H1
Q2 1H
GROUPActual 14
Reported
Actual 13
Pro-Forma∆ 14 vs. 13
Actual 14
Reported
Actual 13
Pro-Forma∆ 14 vs. 13
Net sales 95,6 93,3 2,5% 194,3 190,6 2,0%
-- EBITDA 11,4 11,5 -0,5% 21,2 19,9 6,6%
% of NS 12,0% 12,3% 10,9% 10,5%
-- EBITDA Adj. 12,7 12,7 0,0% 24,1 24,1 0,3%
% of NS 13,3% 13,6% 12,4% 12,6%
Q2 1H
MARCOLINActual 14
Reported
Actual 13
Pro-Forma∆ 14 vs. 13
Actual 14
Reported
Actual 13
Pro-Forma∆ 14 vs. 13
Net sales 58,4 55,7 4,8% 117,8 112,2 4,9%
-- EBITDA 8,2 6,1 34,1% 13,9 12,5 11,0%
% of NS 14,0% 11,0% 11,8% 11,2%
-- EBITDA Adj. 8,8 7,3 20,6% 15,4 16,7 -7,7%
% of NS 15,1% 13,2% 13,1% 14,8%
Q2 1H
VIVAActual 14
Reported
Actual 13
Pro-Forma∆ 14 vs. 13
Actual 14
Reported
Actual 13
Pro-Forma∆ 14 vs. 13
Net sales 37,3 37,7 -1,0% 76,6 78,4 -2,3%
-- EBITDA 3,3 5,4 -39,6% 7,3 7,4 -0,8%
% of NS 8,7% 14,3% 9,6% 9,4%
-- EBITDA Adj. 3,9 5,4 -28,0% 8,8 7,4 18,2%
% of NS 10,4% 14,3% 11,4% 9,4%
Forex Impact
8 8
Key Financials: H1
Negative impact on 1st Half sales performance for -€5.5m of which -€3.2m on 2nd Quarter
CURRENCY HEADWINDS PERSIST
SALES PERFORMANCE
+2.5% +2.0%
At constant Forex At constant Forex
+5.9% +4.9%
2Q 2014 1H 2014
• Net Sales were positive: above last year +€3.7m (+2.0%) mainly driven by TF, TB and DL.
• Net Sales @ constant FX +€9.3 m or +4.9%.
• GM% in June 2014YTD was 120bps below PY, mainly due to VIVA for worse channel mix and higher close-out sales.
Negative impact for € 3.3 m due to fluctuation on exchange rate vs. same period of last year.
• Ebitda Reported in June 2014YTD is €21.2m vs. €19.9m last year (respectively 10.9% vs. 10.5% of Net sales).
• EBITDA Adjusted, excluding one off items, would be 12.4% (or €24.1 m).
• Financial of €9.6 m is including €8.5 m for Bond interests.
9
H1 P&L Executive Summary
Consolidated Profit & Loss
10 10
2014 Reported and 2013 pro-forma: considering Marcolin, Cristallo and Viva
Key financials: H1
YTD Jun
(EURm)Actual 14
Reported
Actual 14
Reported %NS
Actual 13
Pro-Forma
Actual 13
Pro-Forma %NS
Net sales 194,3 100,0% 190,6 100,0%
Cost of sales (76,7) -39,5% (73,0) -38,3%
-- Gross Margin 117,6 60,5% 117,6 61,7%
Selling and marketing costs (88,3) -45,4% (86,8) -45,5%
General and administrative expenses (14,9) -7,6% (18,0) -9,5%
Other operating income and expenses 1,6 0,8% 2,4 1,2%
Effects of accounting for associates 0,2 0,1% 0,2 0,1%
-- OPERATING PROFIT (EBIT) 16,3 8,4% 15,4 8,1%
Net finance costs (9,6) -5,0% (6,8) -3,6%
-- Profit before taxes 6,7 3,4% 8,6 4,5%
Income tax expense (4,3) -2,2% (4,8) -2,5%
-- Net Result 2,4 1,2% 3,8 2,0%
-- EBITDA 21,2 10,9% 19,9 10,5%
-- EBITDA ADJUSTED 24,1 12,4% 24,1 12,6%
• Inventory: has increased compared with Dec 13 (+€2.0m of which Marcolin +€4.0 m and Viva -€2.0 m); compared
to June 2013 has risen for €9.7m (which is mostly due to the PPA provision release)
• Net Trade Receivables: +€18.7 m increase compared to Dec 13 due to seasonality and turnover increase;
compared to June 2013 is +€ 6.8 m in line with the sales trend increase
• Other Current Financials (Cash and Cash liquidity): are decreasing -€8 m strongly affected by the following
items
o 2014 Bond Expenses non recurring payments (€ 3,4m);
o Interests on the Bond notes paid in May for € 8.5 m;
o Payment to HVHC (price adjustment of € 3,3m)
• Intangible assets: include €6.8 m renewal fees for SK (€0.7 m) and DL (€6.1 m) (payment planned starting from
April)
• Payables: the increase of €13.7m is in primarily attributable to non-recurrent payables for the aforementioned
extension of DL and SK licensing agreements, and guaranteed minimum royalties that will be paid after June 30th
since they accrue in the second half of the year.
• Net Financial Position: versus same period of previous year is affected by Bond issuance; June 2014 increased
from €166.2m in Dec. 13 to €175.5m, with a change of €9.3m as detailed in the consolidated cash flow statement
11
B/S Executive Summary
Consolidated Balance sheet
12 2014 Reported, Dec 2013 pro-forma and Dec 2013 Reported: considering Marcolin, Cristallo and Viva
Key financials: H1
Balance Sheet (EURm) June 14 Dec 13 Change
Net trade receivables 80,9 62,2 18,7
Inventory 74,9 72,9 2,0
Payables to suppliers (78,4) (64,7) (13,7)
TRADE WORKING CAPITAL 77,3 70,4 6,9
Other receivables 15,2 14,0 1,2
Other payables (25,7) (23,1) (2,6)
NET WORKING CAPITAL 66,9 61,3 5,6
Other receivables - medium/long term 23,4 25,2 (1,8)
Equity investments 2,1 2,0 0,1
Net tangible assets 22,8 23,5 (0,7)
Net intangible assets 40,9 34,7 6,2
Goodwill 257,6 256,9 0,7
FIXED ASSETS 346,8 342,3 4,5
Funds and reserves (20,0) (22,4) 2,4
NET INVESTED CAPITAL 393,7 381,1 12,5
Financial debts - short term 17,9 17,7 0,2
Financial debts - medium/long term 196,2 195,9 0,4
FINANCIAL POSITION 214,2 213,6 0,6
Other current financial (32,3) (40,3) 8,0
Other non current financial (6,4) (7,1) 0,7
NET FINANCIAL POSITION 175,5 166,2 9,3
NET EQUITY 218,2 215,0 3,3
COVERAGE OF NIC 393,7 381,1 12,5
Net Financial Position
13
(EURm) June 2014 December 2013
Short Term borrowings 17,9 17,7
Medium Long Term borrowings 196,2 195,9
Gross borrowings 214,2 213,6
Cash and cash equivalents 30,6 38,5
Financial receivables current 1,6 1,8
Financial receivables non current 6,5 7,1
Reported Net indebtedness 175,5 166,2
Revolving Credit Facility €25mn 2,0 0,0
Short term borrowings from Banks 11,4 8,6
Receivable Factoring 0,0 1,1
Vendor Loan (HVHC) - Short Term 1,4 4,6
Bond accrued interests 2,2 2,3
Ministry of productive activities 0,1 0,1
Financial leasing VIVA 0,7 0,7
Other 0,1 0,3
Short Term gross borrowing 17,9 17,7
Senior Secured bonds €200mn 200,0 200,0
Bond issue amortized fees -8,5 -9,3
Vendor Loan (HVHC) - Long Term 3,1 3,0
Financial leasing VIVA 1,6 2,0
Ministry of productive activities 0,1 0,2
Other 0,0 0,0
Medium Long Term gross borrowing 196,2 195,9
Key financials: H1
1
2
Consolidated Cash Flow statement
14
Dec 2013 Reported: Marcolin, Cristallo and Viva (Viva for the month from the acquisition date to the annual closing date)
Dec 2013 pro-forma: only Marcolin and Cristallo (excluding Viva for the month from the acquisition date to the annual closing date)
2014 March: considering Marcolin, Cristallo and Viva
(EURm) 2014 June Dec 2013 Reported Dec 2013 Pro-Forma
Operating activities
Profit before income tax expense 6,7 -11,8 -10,0
Depreciation, amortization and impairments 4,5 5,4 5,2
Accruals to provisions other accruals 9,4 17,1 17,2
Adjustments to other non-cash items -6,6 1,0 1,1
CF from operating activities before changes in WC, tax and int. 14,0 11,7 13,4
Movements in working capital -2,2 -9,3 -12,5
Income taxes paid -2,0 -1,9 -1,9
Interest paid -8,9 -17,5 -17,5
Net cash flows provided by operating activities 0,9 -17,0 -18,5
Investing activities
(Purchase) of property, plant and equipment -1,2 -2,6 -2,6
Proceeds from the sale of property, plant and equipment 0,1 0,0 0,2
(Purchase) of intangible assets -8,6 -1,5 -1,6
(Acquisition) of investment - Marcolin e Viva 0,0 -127,7 -53,6
Net cash (used in) investing activities -9,8 -131,9 -57,7
Financing activities
Net proceeds from/(repayments of) borrowings 0,5 91,6 88,0
Other cash flows from financing activities 0,0 51,3 51,2
Net cash from/(used in) financing activities 0,5 142,9 139,2
Net increase/(decrease) in cash and cash equivalents -8,3 -6,0 63,1
Effect of foreign exchange rate changes 0,4 -0,7 -0,7
Cash and cash equivalents at beginning of period 38,5 45,2 45,2
Cash and cash equivalents at end of period 30,6 38,5 107,6
Key financials: H1
Cash Flow – excluding one-offs
15
Key financials: H1
(EURm) June 2014
Net increase/(decrease) in cash and cash equivalents (8,3)
Bond interests paid in May 8,5
Bond Expenses paid in Jan/Feb 3,4
Vendor Loan - Price adjustment due to HVHC 3,3
Renewal Fees - first installment to DL/SK 1,5
Adj. Net increase/(decrease) in cash and cash equivalents 8,3
16
At a glance
Key consolidated financials: H1 2014
Viva Integration Project
Agenda
Appendix
Key consolidated financials: LTM
Revenues Analisys by market destination
Europe million eur Row ASIA North america million eur million eur million eur
17
1,370 1,313 Ex rate EUR/USD
As of June, 30st Full Year
2014 % 2013 % 2014 LTM % 2013 %
Europe 74,5 38,3% 72,3 37,9% 126,2 36,2% 124,1 36,0%
North America 73,8 38,0% 73,7 38,7% 136,6 39,2% 136,6 39,6%
Asia 16,7 8,6% 14,3 7,5% 29,7 8,5% 27,2 7,9%
Rest of World 29,4 15,1% 30,2 15,9% 56,1 16,1% 57,0 16,5%
Total 194,3 100,0% 190,6 100,0% 348,6 100,0% 344,9 100,0%
Total @ constant FX (€ Mln) 199,9
change vs. PY 4,9%
in € Mln, except percentages in € Mln, except percentages
+2.9%
+1.7%
+0.1% or 4,4% constant forex
0%
+17.0%
+8.9% -1.5%
Key financials: LTM
-2.9% or +1% constant forex
18
EBITDA REPORTED EBITDA ADJUSTED *
8.0%
ADJ RUN-RATE EBITDA **
% 2014 LTM on net sales
11.0% % 2014 LTM on net sales
7,8% in 2013 13.4% % 2014 LTM on net sales
11,4% in 2013 13,9% in 2013
* excluding one-offs * including synergies
LTM Ebitda performance (million eur)
2014 LTM FY 2013 2014 LTM FY 2013 2014 LTM FY 20132013 JUNE
LTM
in € Mln, except percentages in € Mln, except percentages in € Mln, except percentages
NET SALES 209,7 204,2 138,9 140,7 348,6 344,9 348,2
% vs. PY 2,7% -1,3% 1,1%
EBITDA 18,0 16,6 10,1 10,2 28,1 26,8 18,0Adjustment 7,7 10,4 1,4 0,0 9,1 10,4 16,8
25,7 26,9 11,5 10,2 37,2 37,1 34,8
Management Fees 0,8 1,8 0,8 1,8 1,8Germany J/V 0,4 0,4 0,4 0,4 0,8
EBITDA ADJUSTED 25,7 26,9 12,7 12,4 38,4 39,3 37,4Synergies 8,5 8,5 8,5
ADJ RUN-RATE EBITDA 46,9 47,8 45,9
EBITDA ADJ % on Net sales 12,24% 13,20% 9,14% 8,80% 11,00% 11,41% 10,75%
EBITDA ADJ RR % on Net sales 13,44% 13,87% 13,20%
CONSOLIDATEDMARCOLIN VIVA
Key financials: LTM
19
At a glance
Key consolidated financials: H1 2014
Viva Integration Project
Agenda
Appendix
Key consolidated financials: LTM
Work Plan
20 20
Viva Integration
Status as of Today(1)
21 21
Viva Integration
Marcolin Entity VIVA Entity Integration Steps % Complete
USA Scottsdale, AZ Sommerville, NJ Integration of Sales Force Optical Channel 100
Migration of VIVA into Marcolin SAP 75
Harmonizaton of Financial Reporting & HR policies 85
Move of stock into NJ, Distribution Center 10
Merge of the AZ business into NJ 10
UK Newbury, Berkshire Harrogate, Yorkshire Business Review 100
Transfer of Domestic Business to Marcolin UK 100
Transfer of International Business to Marcolin SpA 100
Redundancy Program 100
SAP Migration of Item Master, Customer Orders, A/R, A/P 100
Domestic Sales Force Integration 95
Integration of International Sales Force & Customer Service 95
Move of stock into Longarone Distribution Center 95
Closure of VIVA UK Corporate Office 50
HK Hong Kong Hong Kong Business Review 100
Transfer of APAC Business to Marcolin HK Branch 100
Transfer of Techinical Business to Marcolin Asia100
Redundancy Program of VIVA DC Staff100
SAP Migration of Item Master, Customer Orders, A/R, A/P100
Integration of Sales Force, CS and Tech Staff100
Closure of VIVA HK Corporate Office70
Country
Status as of Today (2)
22 22
Viva Integration
Marcolin Entity VIVA Entity Integration Steps % Complete
France Paris Pontault C. (Paris SE)Business Review
20
Integration of two Business0
Closure of VIVA France Corporate Office0
Brasil Alphaville (Sao Paulo) CampinasBusiness Review
10
Integration of two Business0
Closure of VIVA do Brasil Corporate Office0
Canada New BrunswickIntegration into VIVA, NJ
10
Germany Ludwisburg near StuttgartMerge of two companies. Discussion in progress
20
Country
Appendix
23
24
CONSOLIDATED
24
Introductory note on Consolidated Financial Reports
> Year 2013 is affected by a number of non recurring events: • Cristallo mandatory tender offer (OPA) on Marcolin shares (Feb. 2013) • reverse merger of Marcolin Parent Company Cristallo (Oct. 2013) • refinancing on existing indebtedness through HY Bond on Nov. 2013 • VIVA acquisition on Dec. 2013 Due to the scale of the non recurring events, comparison with the previous period in not always immediate, particularly as regards to the Group cash flows. To enhance period-on-period comparability and whereas possible, financial information has been represented as “Pro-Forma” (including Cristallo and Viva results).
25
> Financial information presentation In a departure from the previous financial report issued, this report focuses on the consolidated result for the Group. The results of operations of the Group, which includes Marcolin, Cristallo and Viva are discussed as one entity (whereas previously the result of Marcolin and Viva were discussed separately). This is consistent with the strategy to fully integrate Viva, its operations and its brands into the Marcolin Group. Stand-alone income statement information for both Marcolin and Viva can be found in appendix.
Reasons for restatements
26
Marcolin is still involved in new projects, in consolidation and in development activities, which in fact brought about a global
reorganization at all levels:
• Reorganization process with changes in top and middle management
• Reposition of collections, expanding the “vision” segment and integrating new lines or new models and relaunch of domestic
brand WEB
• Rationalization of the distribution networks both internationally and at domestic level
• In-depth review of the brand portfolio with the addition of new prestigious licensing agreements that will start in January
2015, and discountinuation of non performing licences
For the above reasons the EBITDA is also reported net of the impact of the one-off effects in order to provide comparability.
• Integration process of Viva Group
Consolidated Adjusted Ebitda
27
in € Mln, except percentages Q2 2014 Q2 2013
EBITDA pre-adjustment 21,2 19,9
Cost related to Cristallo impact 0,0 1,2
EBITDA Reported 21,2 21,1
Exceptional termination of licenses 0,0 1,0
Cost related to PAI Acquisition 0,0 0,3
Cost related to VIVA Acquisition 0,0 0,0
Senior management changes 0,7 1,4
Restructuring of sales force 0,0 0,0
Cost related to VIVA Integration 2,2 0,0
Other 0,0 0,3
Total adlustments 2,9 2,9
EBITDA ADJUSTED 24,1 24,1
Net Sales 194,3 190,6
% on Net Sales 12,42% 12,62%
in € Mln, except percentages LTM 2014 FY 2013
EBITDA pre-adjustment 28,1 26,8
Cost related to Cristallo impact 0,2 1,4
EBITDA Reported 28,2 28,1
Exceptional termination of licenses 1,4 2,3
Cost related to PAI Acquisition 0,3 0,5
Cost related to VIVA Acquisition 1,0 1,0
Senior management changes 2,1 2,8
Restructuring of sales force 1,4 1,4
Cost related to VIVA Integration 2,2 0,0
Other 0,6 0,9
Total adlustments 8,9 9,0
EBITDA ADJUSTED 37,2 37,1
Net Sales 348,6 344,9
% on Net Sales 10,67% 10,76%
Key consolidated financials
28
Stand alone
28
Key financials
Sales Sales driven by EUROPE, in particular as expected Italy improve thanks to the
reorganization of selling distribution implemented at the end of 2013.
North America still positive despite to the negative exchange rate effect
117.8 mill. EUR
+5% vs PY
EBITDA EBITDA reported € 13,9m (11.8%); EBITDA Adjusted* € 15,4m, 13.0%
on Net Sales.
13.9
11.8% on Net sales
mill. EUR
29
Stand alone
+6.9% constant FX
> INTRODUCTORY NOTE: * EBITDA is affected by a number of extraordinary items. For this reason it has been adjusted to restate the one-off effects deriving from the re-organization as represented in “Adjusted EBITDA” page.
Revenues 2014 H1 By market of destination, product type and segment
by product type North America
Asia
Rest of W.
Europe
By market destination
Europe
Asia
North America
Rest of the World
+4.8% +2.9%
Revenues in EUR/000 and % changes vs 2013
+20,7% - 1%
Sunglasses
Prescription
frames
+8.7%
+2.8%
by product segment
Luxury
Diffusion
-1.9%
+31.7%
30
Stand alone
31
Stand alone
31
32
Sales SALES: at $ 104,9m (vs. 102,9m of H1 2013), increase of 1,9% vs. PY
104.9 mill. USD
1.9% vs PY
EBITDA EBITDA reported $ 10m (9.6% on Net Sales) ; EBITDA Adjusted* $ 11.9m, 11.4% on
Net Sales.
10 9.6%
on Net sales
mill. USD
Stand alone
Key financials
32
> INTRODUCTORY NOTE: * EBITDA is affected by a number of extraordinary items. For this reason it has been adjusted to restate the one-off effects deriving from the re-organization as represented in “Adjusted EBITDA” page.
by market of destination
Europe
Asia
Americas
Rest of the World
Revenues in USD/000 and % changes vs 2013
by product segment
Diffusion +1.9%
by product type
Americas
Asia
Rest of W.
Europe
Revenues 2014 Q2 - Viva By market of destination, product type and segment
+2.5%
Sunglasses
Prescription
frames -0.5%
+5.8%
+5.4% -2.6%
+2.4%
33
Investor relation
Marcolin Contacts:
Massimo Stefanello
CFO and COO
+39 0437 777111
Alessandra Sartor
+39 0437 777204
Francesca Pellegrini
+39 0437 777152
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