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Essilor : First Half 2009 Results

    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 in
ophthalmic optics, has approved the financial statements for the six months
ended 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
    Basic earnings per share (in        0.98            0.96         +2.4%

    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

    Highlights since the end of the first half

Following approval by UK competition authorities, Essilor completed its acquisition of Wholesale Lens Corporation Limited, a Croydon-based wholesaler of ophthalmic lenses that generated revenue of GBP8.4 million in 2008. WLC will be consolidated as from August 2009.

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

Ongoing share buybacks

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

    The meeting will be available live and recorded for later listening at:
    The presentation will be webcast at:
    Regulatory Information:

The interim financial report is available at, by clicking on:

    Next financial announcement:
    Third-quarter revenue will be announced on Thursday, October 22, 2009.

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, presbyopia and astigmatism. Essilor operates worldwide through 15 production sites, 293 lens finishing laboratories and local distribution networks.

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

    Codes and symbols: ISIN: FR 0000121667; Reuters: ESSI.PA; Bloomberg:

                                MANAGEMENT REPORT

                                 First-Half 2009

    EUR millions               First-half 2009 First-half 2008 % Change

    Revenue                        1,663.4         1,520.2        +9.4%
    Contribution from                302.6           276.3        +9.5%
                                      18.2%           18.2%
    % of revenue
    Operating profit                 281.9           261.7        +7.7%
    Profit attributable to           202.4           198.3        +2.1%
    equity holders of Essilor

    % of revenue                      12.2%           13.0%
    Basic earnings per share          0.98            0.96        +2.4%
    (in EUR)

(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, 2009 rose 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%, reflecting the contributions of the businesses acquired in 2008 and in the first half of 2009. 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 of 1.0% in the first quarter and of 0.4% in the second, reflecting the following factors:

    - The successful launch of value-added products around the
      world, including the new Crizal Forte(R) anti-reflective lens, the
      Essilor Transitions(R) VI variable-tint lens in Europe, the Xperio(TM)
      polarized lens in the United States and the new MrBlue(TM) edger.

    - Firm growth in entry-level products, where Essilor holds
      strong positions.

    - A disappointing first-quarter performance in Instruments.

    Revenue by region

    EUR millions   H1 2009  H1 2008   % Change      % Change      Change in
                                     (reported*) (like-for-like)   scope of

    Europe          665.1    693.5      -4.1%         -4.4%          +2.0%
    North America   718.1    617.9     +16.2%         -0.9%          +4.3%
    Asia-Pacific    170.1    146.8     +15.9%        +13.5%          +1.3%
    Latin America    60.3     60.6      -0.5%         +9.4%          +0.7%
    equipment [1]    49.8**    1.4***    n.a.          n.a.           n.a.

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

Eleven acquisitions in the first half

During the first half, Essilor acquired or increased its holding in eleven companies. Together, they represent additional full-year revenue of EUR47 million for a total investment of EUR36.9 million.

    - In the United States, Essilor of America added three
      laboratories to its network: Barnett & Ramel ($10.8 million in
      revenue), McLeod ($10 million) and Abba Optical $2.2 million).

    - In Poland, Essilor raised its stake in JZO, the ophthalmic
      optics market leader, to 51% from 10% previously.

    - In Australia, Essilor completed four acquisitions
      representing an aggregate EUR3.6 million in full-year revenue. Equity
      interests were acquired in three prescription laboratories-Prescription
      Glass Pty Ltd, Precision Optics Pty Ltd and Wallace Everett Lens
      Technology Pty Ltd-and a 50% stake was acquired in Sunix Computer
      Consultants, a leading developer of optometric practice management

    - In India, Essilor raised its interest in GKB Rx Lens Private
      Ltd to 60% from 10%.

    - In Brazil, Essilor acquired a majority stake in Technopark,
      a joint venture with a local partner that combines the business
      operations of two prescription laboratories (EUR10 million in revenue).

    - In Canada, Nikon Optical Canada, a Nikon-Essilor subsidiary,
      increased its stake in the TechCite prescription laboratory from 50 to

Gross margin up 7.3% to EUR930.7 million

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

Operating expenses up 6.3% to EUR628.1 million

Operating expenses in the first half accounted for 37.8% of consolidated revenue, versus 38.9% in the prior-year period, when they amounted to EUR590.7 million. Operating expenses comprised:

    - R&D and engineering costs of EUR74.9 million (net of a
      EUR4.9 million tax credit), representing 4.5% of consolidated revenue,
      down very slightly from 4.7% in the first six months of 2008.

    - Selling and distribution costs of EUR353.4 million (21.2% of
      revenue compared with 21.7% in the previous-year period).

    - Other operating expenses of EUR199.8 million (12.0% of
      revenue versus 12.5% in first-half 2008).

Contribution from operations up 9.5% to EUR302.6 million

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

Operating profit up 7.7% to EUR281.9 million

"Other income and expenses from operations" and "Gains and losses on asset disposals" together represented a net expense of EUR20.7 million (compared with EUR14.6 million in first-half 2008). Compensation costs on stock options, performance share grants and employee stock ownership plans declined to EUR9.7 million from EUR12.3 million in first-half 2008, while restructuring costs related to the closing of several production facilities rose 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 of EUR5.3 million

Finance costs and other financial income and expenses represented a net expense of EUR5.3 million compared with net income of EUR2.9 million in first-half 2008, reflecting the increase in finance costs, which mainly concerned the financing of the Satisloh acquisition and the share buyback program.

Profit attributable to equity holders of Essilor International up 2.1% to EUR202.4 million

    Net profit totaled EUR207.1 million, an increase of 2.8%. It comprised:

    - Income tax expense of EUR80.1 million. The 29.0% effective
      tax rate compared with a 29.4% rate for first-half 2008. The decline
      was mainly due to Satisloh's tax rate, which is lower than the Company

    - The share of profit from associates-VisionWeb, Sperian
      Protection and Transitions-which amounted to EUR10.7 million, versus
      EUR14.7 million in first-half 2008. Transitions' earnings were up
      slightly at EUR9.8 million (from EUR9.6 million in first-half 2008)
      while Sperian Protection's earnings were sharply lower at EUR0.9
      million (compared with EUR5.1 million).

Profit attributable to equity holders of the parent was 2.1% higher, at EUR202.4 million. Earnings per share rose by 2.4% to EUR0.98.


Inventories amounted to EUR493 million at June 30, 2009, compared with EUR475 million at year-end 2008, an increase of 3.8%. Like-for-like, the increase was 2.1%.


Capital expenditure net of divestments totaled EUR72 million or 4.3% of consolidated revenue. Financial investments net of disposals amounted to EUR60.9 million. Of this amount, acquisitions accounted for EUR36.9 million, while buybacks of shares accounted for EUR19.5 million.

    Cash Flow Statement

    EUR millions
    Net cash from operations      273  Capital expenditure net of
                                        the proceeds from asset
                                        sales                         72
    Proceeds from employee share       Change in WCR and
     issue                         16   provisions                   102
    Change in net debt             99  Dividends                     138
                                       Financial investments net
                                        of disposals                  61
                                       Effect of changes in
                                        exchange rates and in the
                                        scope of consolidation        15

Net debt increased by EUR99 million to EUR211 million, from EUR112 million at year-end 2008 as the Company' high profitability and robust performance enabled it to pursue an ambitious financial investment program involving acquisitions and share buybacks and to increase dividends. Net debt was also affected by the seasonal impact of annual discount payments to customers, 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 companies consolidated by the proportionate or equity method was not significantly different from the description in the 2008 Registration Document. Similarly, risks and contingencies to which the Company is exposed in the months ahead are generally in line with the analysis presented in Chapter 4 of the Registration Document.


In the second half of the year, Essilor will continue to grow the business, leveraging the quality of its products and its services to opticians, backed by an acquisitions strategy that extends across all regions. The Company will also pursue its efforts to maintain a high operating margin. Over the full year, Essilor expects to strengthen its presence in all markets.

(1)Application of IFRS 8 - Operating Segments has resulted in the creation of the "Laboratory Equipment" business segment, which includes the machines, consumables and replacement parts sold by Satisloh and Delamare to prescription laboratories. The change has not has a material impact on revenue from the operating regions, which consolidate all of the other sales (primarily of ophthalmic lenses and optical instruments).


    Investor Relations and Financial Communications
    Veronique Gillet - Sebastien Leroy
    Phone: +33-1-49-77-42-16


SOURCE Essilor
Copyright©2009 PR Newswire.
All rights reserved

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