Essilor : First Half 2009 Results

Friday, September 18, 2009 General News
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Following approval by UK competition authorities, Essilor completed itsacquisition of Wholesale Lens Corporation Limited, a Croydon-based wholesalerof ophthalmic lenses that generated revenue of GBP8.4 million in 2008. WLCwill be consolidated as from August 2009.

As mentioned in the July 18, 2009 news release, Essilor will alsoconsolidate five new companies in the second half: De Ceunynck in Belgium,Amico in the Middle East and Apex Optical, Vision Pointe Optical andOptiSource International in the United States.

Ongoing share buybacks

Since June 30, 2009, Essilor has pursued a share buyback program set upto offset potential dilution from the conversion of outstanding OCEANE bonds.On August 21, Essilor purchased 576,547 of its own shares on the open marketfor a total of EUR21.9 million. Since the beginning of the year, 1,256,245shares have been purchased for a total of EUR42.1 million.


A meeting with analysts will be held today, August 27, at 9:00 a.m. Paristime.

The interim financial report is available at, byclicking on:

Essilor International is the world leader in ophthalmic optical products,offering a wide range of lenses under the flagship Varilux(r), Crizal(r),Essilor(r) and Definity(r) brands to correct myopia, hyperopia, presbyopiaand astigmatism. Essilor operates worldwide through 15 production sites, 293lens finishing laboratories and local distribution networks.

The Essilor share trades on the NYSE Euronext Paris market and isincluded in the CAC 40 index.

(1) Operating profit before compensation costs of share-based payments,restructuring costs, other income and expense, and goodwill impairment.

Revenue up 9.4% to EUR1,663.4 million

Essilor's consolidated revenue for the six months ended June 30, 2009rose by 5.3%, excluding the currency effect, and by 0.7% like-for-like.Changes in the scope of consolidation increased revenue by 6.0%, reflectingthe contributions of the businesses acquired in 2008 and in the first half of2009. The currency effect was a positive 4.1%, lifting growth to 9.4%.

The like-for-like decrease in first-half revenue included a decline of1.0% in the first quarter and of 0.4% in the second, reflecting the followingfactors:

(*) Currency effect: +4.1%. (**) The figure excludes Satisloh sales toEssilor, which totaled EUR14.8 million. (***) Satisloh was not part of theGroup in first-half 2008.

Eleven acquisitions in the first half

During the first half, Essilor acquired or increased its holding ineleven companies. Together, they represent additional full-year revenue ofEUR47 million for a total investment of EUR36.9 million.

Gross margin up 7.3% to EUR930.7 million

Gross margin (revenue less cost of sales, expressed as a percentage ofrevenue) stood at 56.0%, compared with 57.0% in first-half 2008. The decreaseresults mainly from the dilutive impact of acquisitions, in particularSatisloh.

Operating expenses up 6.3% to EUR628.1 million

Operating expenses in the first half accounted for 37.8% of consolidatedrevenue, versus 38.9% in the prior-year period, when they amounted toEUR590.7 million. Operating expenses comprised:

Contribution from operations up 9.5% to EUR302.6 million

The contribution margin stood at 18.2% of revenue, on a par withfirst-half 2008's record high and up from 17.9% for full-year 2008. Thisperformance reflects the Company's ability to integrate acquisitions, todrive further productivity gains and to diligently manage its operatingexpenses in a slowing market.

Operating profit up 7.7% to EUR281.9 million

"Other income and expenses from operations" and "Gains and losses onasset disposals" together represented a net expense of EUR20.7 million(compared with EUR14.6 million in first-half 2008). Compensation costs onstock options, performance share grants and employee stock ownership plansdeclined to EUR9.7 million from EUR12.3 million in first-half 2008, whilerestructuring costs related to the closing of several production facilitiesrose to EUR6.5 million from EUR0.2 million for the prior-year period.

Operating profit represented 17.0% of consolidated revenue.

Finance costs and other financial income and expenses: net expense ofEUR5.3 million

Finance costs and other financial income and expenses represented a netexpense of EUR5.3 million compared with net income of EUR2.9 million infirst-half 2008, reflecting the increase in finance costs, which mainlyconcerned the financing of the Satisloh acquisition and the share buybackprogram.

Profit attributable to equity holders of Essilor International up 2.1% toEUR202.4 million

Profit attributable to equity holders of the parent was 2.1% higher, atEUR202.4 million. Earnings per share rose by 2.4% to EUR0.98.


Inventories amounted to EUR493 million at June 30, 2009, compared withEUR475 million at year-end 2008, an increase of 3.8%. Like-for-like, theincrease was 2.1%.


Capital expenditure net of divestments totaled EUR72 million or 4.3% ofconsolidated revenue. Financial investments net of disposals amounted toEUR60.9 million. Of this amount, acquisitions accounted for EUR36.9 million,while buybacks of shares accounted for EUR19.5 million.

Net debt increased by EUR99 million to EUR211 million, from EUR112million at year-end 2008 as the Company' high profitability and robustperformance enabled it to pursue an ambitious financial investment programinvolving acquisitions and share buybacks and to increase dividends. Net debtwas also affected by the seasonal impact of annual discount payments tocustomers, which are generally concentrated in the first half. Net cash flow(cash flow less capital expenditure) rose by 12.5% to EUR99 million.

Related party transactions / Risks and contingencies

In first-half 2009, the nature of transactions with companiesconsolidated by the proportionate or equity method was not significantlydifferent from the description in the 2008 Registration Document. Similarly,risks and contingencies to which the Company is exposed in the months aheadare generally in line with the analysis presented in Chapter 4 of theRegistration Document.


In the second half of the year, Essilor will continue to grow thebusiness, leveraging the quality of its products and its services toopticians, backed by an acquisitions strategy that extends across allregions. The Company will also pursue its efforts to maintain a highoperating margin. Over the full year, Essilor expects to strengthen itspresence in all markets.

(1)Application of IFRS 8 - Operating Segments has resulted in thecreation of the "Laboratory Equipment" business segment, which includes themachines, consumables and replacement parts sold by Satisloh and Delamare toprescription laboratories. The change has not has a material impact onrevenue from the operating regions, which consolidate all of the other sales(primarily of ophthalmic lenses and optical instruments).An Excellent First Half: - Contribution Margin Maintained at a High 18.2% - A Further Increase in Basic Earnings per Share - Sharp Rise in net Cash Flow The Board of Directors of Essilor International, the world leader inophthalmic optics, has approved the financial statements for the six monthsended June 30, 2009. EUR millions First-half 2009 First-half 2008 % Change Revenue 1,663.4 1,520.2 +9.4% Contribution margin 302.6 276.3 +9.5% % of revenue 18.2 % 18.2 % - Profit attributable to equity 202.4 198.3 +2.1% holders of Essilor International Basic earnings per share (in 0.98 0.96 +2.4% EUR) The highlights of the first half were: - The successful launch of new products in an overall ophthalmic optics market that experienced slower growth. Among the products were the Crizal Forte(R) anti-reflective lens, the Essilor Transitions(R) variable-tint lens in Europe, the Xperio(TM) polarized lens in the United States and the new Mr Blue(TM) edger. - Sustained growth momentum in emerging markets, notably India, South Korea, China, the ASEAN countries, Latin America, South Africa and Russia. - Strong operating profitability with a contribution margin (18.2%) that returned to its all-time high of first-half 2008 (including Satisloh) thanks to cost discipline across the organization. - Profit attributable to equity holders of Essilor that remained high at 12.2% of revenue and a further increase in earnings per share. - An ongoing external growth strategy, with the acquisition of 11 companies around the world representing approximately EUR47 million in full-year revenue. - A sharp 12.5% increase in net cash flow and a solid balance sheet. Highlights since the end of the first half Acquisitions

SOURCE Essilor

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