PADUA, Italy—The Board of Directors of Safilo Group S.p.A.
(SFLG.MI) approved the company’s consolidated financial statements for the year ended Dec. 31, 2017 and examined the separate financial statements for the fiscal year, which will be submitted for approval by the shareholders at the company’s annual general meeting to be held on April 24. The board said it had decided not to propose the payment of a dividend at that annual meeting. As communicated earlier this year on Jan. 30, Safilo’s total net sales reached €1,047.0 million in 2017, a decline of €194 million at constant currency compared to 2016.
The reduction of sales was mainly driven by the change of the Gucci license into a supply agreement, representing a net decline of €155 million (minus 12 percent), and by the implementation of the new Order-to-Cash IT system in the Padua distribution center (DC) early in the year. That event negatively affected deliveries and, while the group operationally recovered from mid-year, it impacted order taking and thus reduced sales and profit up to and including the fourth quarter.
In the year, the sales of Safilo’s Going Forward brand portfolio decreased by 3.9 percent at constant exchange rates, with Southern European countries being more affected by the Padua DC issues and by the decline experienced by the Dior collections after several years of extraordinarily strong growth, the company said. On the other hand, Safilo Group’s Own Core brands and the total of all other licensed brands grew by single digits, thanks in particular to the significant progress recorded by the group in the emerging markets, the statement noted.
At the operating level, 2017 adjusted EBITDA stood at €41.1 million, with the margin at 3.9 percent of sales, compared to €88.8 million and 7.1 percent of sales in 2016. This result mainly reflected the contraction recorded by the Group at the gross profit level, following the dilutive effect of the change of the Gucci license into a supply agreement and the sales decline of the Going Forward brand portfolio. The latter event affected capacity absorption of the Group’s Italian plants and the operational leverage of the year.
In 2017, in line with the announced overheads productivity cost savings of €13 million, partially counterbalanced by approximately €4 million of exceptional costs incurred in relation to the Padua DC issues. Safilo closed 2017 with an adjusted Group net loss of €47.1 million compared to the adjusted net profit of €15.4 million recorded in 2016.
2017 adjusted net result does not include a non-cash impairment charge of €192.0 million on goodwill allocated to its cash generating units and non-recurring costs of €12.5 million.
Eugenio Razelli, Safilo Group executive chairman and acting interim CEO commented, “2017 was a complex year for Safilo, in which we faced the transformation of the Gucci license into a supply agreement and a difficult implementation of a new Order-to-Cash IT system in the Padua distribution center, this impacting our service levels and order intaking opportunities. These events significantly affected the Group’s economic and financial results.”
He added, “On the positive side, emerging markets showed positive trends and our own core brands performed better. We look toward 2018 as a brand new start for Safilo, with the announced appointment of Angelo Trocchia as new CEO to take the company through a new phase of successful business execution and brand portfolio development. Trocchia will join Safilo, effective April 1, 2018.”
Safilo reported on those senior executive changes last month, as VMAIL reported