Sales of the going-forward brands gain momentum with Q2 growing 9% Progress on cost savings contributed to improved operating performance in Q2

Padua, August, 2016 – The Board of Directors of Safilo Group S.p.A. has today reviewed and approved the results of the first half of 2016.

The first half of the year was one of improving overall momentum as the period progressed, in particular from sales of the going forward brands in Europe, North America and Rest of World namely IMEA and in the cost saving and operational improvement programmes.

Net sales for the first six months of 2016 registered a decline of 3.5% at current exchange rates and of 2.1% at constant currencies while sales of the going-forward brands portfolio increased by 5.3%. Business recovered momentum during the second quarter, with revenues broadly flat at current exchange rates (-0.3%) but growing 2.0% at constant exchange rates. This reflected the improved sales performance of the going-forward brands portfolio, increasing in the second quarter by 9.0% at constant exchange rates and more than offsetting the negative impact of the brands that the Group stopped/will stop servicing. Progress was particularly evident in Europe as well as in the Group’s core business in North America and in IMEA, while Asia remained subdued.

In the first half of 2016, the gross profit margin was substantially in line with the same period of 2015, at 60.6% of sales. In the second quarter of the year, gross profit margin stood at 60.2% of sales compared to 60.9% in the second quarter of 2015.

At the operating level, H1 2016 adjusted1  EBITDA margin of 8.9% was 40 basis points lower than in the first half of 2015, but it recorded an improvement of 90 basis points in the second quarter, to 9.5% of sales, thanks to higher costs savings and better operating leverage.

In the first six months of 2016, the Group’s adjusted1 net result increased 130.6%, mainly reflecting positive dynamics in net financial charges.

At the end of June 2016, Group net debt stood at Euro 102.8 million, improving from the position of Euro 110.1 million at the end of June 2015.

Luisa Delgado, CEO, commented:

“In the first six months, our going forward brands portfolio made good progress, growing by 5.3% at constant exchange rates, thanks to the broad based positive trends across the different market segments in which we are active. In the second quarter, we achieved sales acceleration, recovering a considerable part of the first quarter performance driven by the service shortfalls that had prevented us to fully leverage the sales opportunities of our order book.

Our gross margin was in line with last year while we progressed our supply network modernization focused on in- sourcing production into our own worldwide plant network and reshoring back to Italy, and simplifying our manufacturing and logistic flows. At the operating level, we progressed with the implementation of our cost savings program to improve our overheads productivity.

We continued to sharpen our focus on our own core brands, by concluding the integration of Polaroid with the closure of the Vale site, qualifying our stylistic direction for Carrera, while

In the first half of 2016, Group total net sales of Euro 651.1 million decreased 3.5% at current exchange rates and 2.1% at constant exchange rates compared to Euro 674.9 million in the same period of 2015.

Wholesale revenues equaled Euro 612.4 million compared to Euro 627.9 million in the first half of 2015, decreasing 1.0% at constant exchange rates.

In the first six months of the year, total net sales of the going-forward brands increased by 5.3% at constant exchange rates (wholesale revenues +6.8%).

Gross profit of Euro 394.6 million declined 3.7% compared to Euro 409.9 million in the first half of 2015, while the gross profit margin of 60.6% was substantially in line with the margin recorded in the first half of 2015.

Adjusted1 EBITDA of Euro 58.3 million declined 7.0% compared to the adjusted1  EBITDA of Euro 62.7 million recorded in the same period of 2015. The adjusted1 EBITDA margin of 8.9% was 40 basis points lower than the 9.3% posted in H1 2015, primarily due to lower sales.

Adjusted1  EBITDA of the wholesale business equaled Euro 59.0 million, up 0.7% compared to the adjusted1  EBITDA of Euro 58.6 million recorded in H1 2015. The adjusted1 EBITDA margin of wholesale increased in the period by 30 basis points, to 9.6% from 9.3% posted in H1 2015.

EBIT of Euro 37.5 million decreased 12.8% compared to the adjusted1  EBIT of Euro 43.1 million registered in H1 2015. Adjusted1 EBIT margin of 5.8% compared with 6.4% in H1 2015.

In the first half of 2016, total net financial charges were positive for Euro 0.8 million compared to a negative impact of Euro 22.7 million in H1 2015. This reflected lower net interest charges and the positive impacts of the net exchange rates differences and the fair value valuation of the option component embedded in the equity-linked bonds.

The above, coupled with a lower tax rate, enabled Safilo to post a net result of Euro 22.9 million, up 130.6% compared to the adjusted1  net result of Euro 9.9 million recorded in H1 2015.

In the second quarter of 2016, total net sales of Euro 349.5 million, were broadly flat (-0.3%) compared to Euro 350.6 million in the same quarter of 2015, whereas they increased 2.0% at constant exchange rates.

Wholesale  revenues  equaled  Euro 327.6 million  compared  to Euro 323.4  million  in the second  quarter  of 2015, increasing 3.7% at constant exchange rates.

In the second quarter of 2016, total net sales of the going-forward brands increased by 9.0% at constant exchange rates (wholesale revenues +11.2%).

Gross profit of Euro 210.4 million declined 1.4% compared to Euro 213.4 million in the same quarter of 2015. Gross profit margin of 60.2% declined 70 basis points compared to 60.9% in the second quarter of 2015.

The adjusted EBITDA of Euro 33.1 million increased 9.7% compared to the adjusted1  EBITDA of Euro 30.2 million recorded in the same period of 2015. The adjusted1 EBITDA margin of 9.5% increased 90 basis points compared to 8.6% in Q2 2015.

Adjusted1  EBITDA of the wholesale business equaled Euro 31.8 million, up 22.0% compared to the adjusted1 EBITDA of Euro 26.1 million recorded in Q2 2015. The adjusted1 EBITDA margin of wholesale increased in the period by 160 basis points, to 9.7% from 8.1% posted in Q2 2015.