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Date Source Announcement
13Jun16 02:00 PRN Essilor named No. 5 in Newsweek's 2016 Green Rankings
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Temporary issues mire the short term; strong fundamentals intact

  • 25 Oct 16

Essilor released Q3 FY16 trading results in line with our estimates (total revenue: 6.4% vs AV estimate: 6.7%), primarily driven by the 4% scope impact vs AV’s estimate of 3.2%. However, organic growth slowed to 3.2% (vs AV’s estimate: 4.4%) due to lower than expected growth in the Lenses and Optical Instruments segment (2.9% vs AV’s estimate: 4.7%; accounts for c.89% of Q3 16 revenue). Within the segment, LatAm’s organic growth slowed to 4.5% (vs AV estimate: 11.5%; accounts for c.7% of Q3 16 revenue) due to macro-economic headwinds in Brazil (adverse impact on optical store traffic). APAC’s revenue growth also decelerated to 5.7% (vs AV’s estimate: 8.5%; accounts for c.16% of Q3 16 revenue) due to the consumer spending slowdown in the Middle East and Turkey. The sluggish performance continued in North America (1.3% vs AV’s estimate: 2.5%; accounts for c.39% of Q3 16 revenue), once again dampened by the decline in Transitions Optical sales to third-party casters and a slower than expected recovery in Coastal.com revenue. Moreover, the organic growth in Europe came in at 3.0% (vs AV’s estimate: 4.0%; accounts for c.27% of Q3 16 revenue) due to a poor performance in the UK and Central Europe. After dismal growth in H1 16, the Sunglasses and Readers segment clocked 6.9% organic growth (vs AV’s estimate: 2.0%; accounts for c.8% of Q3 16 revenue). The recovery was led by a good performance in North America (benefiting from favourable weather conditions compared to H1) and China (inventory management issue getting resolved). The Equipment division also witnessed robust growth (5.4% vs AV’s estimate: 2.0%; accounts for c.3% of Q3 16 revenue), leveraging on the increased demand for surfacing and coating machines by independent laboratories and optical chains in North America. The FX impact came in line with AV’s estimate (-0.9%). The company made 16 acquisitions/partnerships in the current fiscal year; aggregating c. €205m annualised revenue. Management now sounds cautious about achieving the 4.5% lfl target for FY16 but remains optimistic for 8.0% growth at CER.

Strong fundamentals intact; temporary impact from guidance cut

  • 05 Sep 16

Essilor posted H1 FY16 results below our estimates as well as market consensus. In Q2 16, the lfl revenue increased by +3.2% (vs Q2 15: +4.4%), primarily due to a slowdown in the Lenses & Optical segment (+4.4% vs Q2 15: +4.9%; accounts for c.87% of group revenue). The organic growth of the North America lenses business slumped to +1.5% (vs Q2 15: +3.7%; accounts for c.37% of the group’s revenue) on the back of a sluggish performance in the ‘Transitions Opticals’ business and lesser than expected synergies from ‘US alliance’ (Vision source and PERC). However, while Europe once again showed a sustained performance (+4.5% vs Q2 15: +5.0%; accounts for c.28% of the group’s revenue), the positive momentum continued in Asia-Pacific/Middle East/Africa (+8.5% vs Q2 15: +5.2%; accounts for c.16% of group revenue) and Latin America region (+11.4% vs Q2 15:+10.5%; accounts for c.6% of group revenue). The biggest let down was the Sunglasses and Readers segment (-5.8% lfl vs Q2 15: +3.2%; accounts for c. 10% of the group’s revenue), affected by unfavourable / wet weather conditions and a slower than expected recovery in China. The company’s reported revenue grew by 2.9% (vs Q2 15: +20.0%; our estimate: 7.3%) as the positive scope impact (+3.7% vs Q2 15: 2.2%) was offset by currency headwinds during the quarter (-4.0% vs Q2 15: 13.5%; particularly due to the weakening of the BRL, CNY and GBP). In H1 16, the reported revenue increased by 5.1% (vs H1 15: +22.6%; our estimate: 7.4%) while the operating margin remained stable at 18.0% (in line with our expectations). Furthermore, lower than expected tax expense (attributable to a reduction in dividend taxes as a major portion of 2015 dividend was paid in shares) underpinned the EPS by 6.4% (vs H1 15: 18.7%; our estimate: 12.0%). Essilor made 12 acquisitions/partnerships in the current fiscal year, aggregating c. €200m annualised revenue. Management has lowered the FY 2016 guidance of lfl growth by 50bp (vs previous guidance of 5%).