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Silmäasema Oyj: Strong net sales and profitability performance for Silmäasema in both segments

Silmäasema Oyj           
Stock Exchange Release                      
8 November 2019 at 8:00 a.m. EET

Silmäasema Oyj Interim Report 1 January –30 September 2019

Strong net sales and profitability performance for Silmäasema in both segments

Silmäasema arranges today news conference and conference call for media and analysts at 10:30 am Finnish time. Details of the events can be found at the end of this release.

This is a summary Silmäasema's Interim Report for January-September 2019. The complete report is attached to this release and also available at https://company.silmaasema.fi/en/

July–September 2019 in brief:

  • Net sales increased by 9.7% compared to July–September 2018, amounting to EUR 29.5 million (26.9). The like-for-like net sales grew by 11.2%.
  • The adjusted EBITDA* increased by 114.4% and was EUR 4.6 million (2.1), or 15.6% of net sales (8.0%). Without the impact of IFRS 16, the adjusted EBITDA would have been 9.3% (8.0%) of net sales.
  • The adjusted operating result* increased by 115.9% to EUR 1.4 million (0.6).

January–September 2019 in brief:

  • Net sales increased by 6.3% compared to January–September 2018, amounting to EUR 96.2 million (90.5). The like-for-like net sales grew by 5.7%.
  • The adjusted EBITDA* increased by 89.4% and was EUR 15.6 million (8.2), or 16.2% of net sales (9.1%). Without the impact of IFRS 16, the adjusted EBITDA would have been 10.4% (9.1%) of net sales.
  • The adjusted operating result* increased by 48.3% to EUR 5.7 million (3.9).
  • Cash flows from operating activities* developed strongly and amounted to EUR 13.9 million (6.2).
  • Net debt* was EUR 48.7 million (33.9) at the end of the period.
  • The net debt to adjusted EBITDA ratio* on 31 September 2019 was 2.5 (3.1).
  • Basic earnings per share improved to EUR 0.17 (0.14).

The figures for 2018 are from the audited financial statements. The quarterly figures are unaudited. Figures in parentheses refer to the comparable period in 2018, and “comparison period” refers to the comparable period in the previous year, unless otherwise mentioned.

Outlook for 2019 (updated 18 Sep 2019)

In September Silmäasema issued a positive profit warning to announce an improved outlook for 2019. Silmäasema expects its full-year, like-for-like net sales to increase slightly from the previous year and its adjusted EBITDA margin to be slightly better than in the last year (2018: 9.6%), excluding the effect of the IFRS 16 standard, which was adopted at the beginning of 2019. Previously Silmäasema expected its full-year, like-for-like net sales to be at the previous year’s level and its adjusted EBITDA margin to be at the previous year’s level or slightly better (2018: 9.6%), excluding the effect of the IFRS 16 standard, which was adopted at the beginning of 2019.

The improved outlook for like-for-like net sales is based on both actual sales by Optical Retail and the expected positive performance of both Optical Retail and Eye Clinics in the remaining part of the year. The relative profitability of the group is also expected to improve as development of the network and the programme to boost efficiency, announced earlier this year, are making faster than expected progress. The company has almost achieved the previously set annual efficiency target of EUR 2 million and is now raising this target to EUR 3 million.

*IFRS 16 affects the comparability of the reported figures

At the beginning of the year, Silmäasema adopted the IFRS 16 Leases standard, which entered into force on 1 January 2019. The figures reported for July–September and January–September 2019 are not comparable with the previous year’s figures, as they include items based on the adoption of the IFRS 16 standard. The impact of the adoption of the IFRS 16 standard on the key figures is presented in the “Impact of IFRS 16 on the key figures” table. The data in parentheses for the comparison period have not been adjusted for the IFRS 16 standard. There is more information on the adoption of the standard in Note 5.3 to the interim report on pages 33–34.
Key figures

EUR thousand, unless otherwise stated 7–9/2019 7–9/2018 Change, % 1–9/2019 1–9/2018 Change, % 1–12/2018
Net sales 29,504 26,892 9.7% 96,236 90,520 6.3% 122,873
Comparable net sales growth, % 11.2% -3.2%   5.7% -2.1%   -1.6%
EBITDA* 4,142 3,039 36.3% 14,912 8,312 79.4% 11,443
Adjusted EBITDA*,** 4,604 2,147 114.4% 15,589 8,230 89.4% 11,765
- Adjusted EBITDA*, % 15.6% 8.0%   16.2% 9.1%   9.6%
Operating result 760 1,520 -50.0% 4,804 3,914 22.7% 5,492
Adjusted operating result*,** 1,381 639 115.9% 5,730 3,863 48.3% 5,844
- adjusted operating result*, % 4.7% 2.4%   6.0% 4.3%   4.8%
Basic earnings per share, EUR* 0.01 0.06   0.17 0.14   0.23
Net debt / Adjusted EBITDA*       2.5 3.1   2.4
Investments – operational       1,029 5 933 -82.6% 6,716
Investments – acquisitions       1,467 1,683 -12.8% 1,775
Investments – total       2,497 7,616 -67.2% 8,491
Number of locations, Silmäasema chain       169 182 -7.1% 181

* The key figure is not comparable due to the adoption of the IFRS 16 standard at the beginning of 2019.
** Silmäasema presents both its adjusted EBITDA and adjusted operating result, which have been adjusted for significant extraordinary items. It is the company’s view that the adjusted EBITDA best illustrates the profitability development of its business operations.

Impact of IFRS 16 on the key figures

EUR thousand, unless otherwise stated Reported
EBITDA 4,142 2,132 2,010 3,039 14,912 9,116 5,796 8,312
Adjusted EBITDA 4,604 2,735 1,869 2,147 15,589 9,990 5,599 8,230
Adjusted EBITDA, % 15.6% 9.3% 6.3pp 8.0% 16.2% 10.4% 5.8pp 9.1%
Operating result 760 689 71 1,520 4,804 4,587 217 3,914
Adjusted operating result 1,381 1,309 71 639 5,730 5,512 217 3,863
Profit before taxes 426 523 -97 1,241 3,440 3,737 -297 2,924
Profit (loss) for the period 186 263 -78 901 2,380 2,617 -238 2,064
Basic earnings per share, EUR 0.01 0.02 -0.01 0.06 0.17 0.18 -0.02 0.14
Cash flow from operating activities         13,909 8,825 5,084 6,235
Net debt         48,729 21,939 26,790 33,940
Net debt / Adjusted EBITDA (leverage)         2.5 1.6 0.9 3.1
Gearing, %         113.2% 51.0% 62.3pp 82.8%
Equity ratio         35.5% 44.0% -8.5pp 42.6%
Return on capital employed, % (ROCE)         4.5% 5.0% -0.5pp 4.9%
Return on equity, % (ROE)         5.6% 6.2% -0.6pp 5.2%

CEO Jussi Salminen:

“Silmäasema had a very strong third quarter both in terms of net sales and profitability. In fact, this was the fourth consecutive quarter that the adjusted EBITDA improved on the comparison period. Net sales improved by almost 10% in July-September and cash flow from operating activities improved very strongly. The positive performance was based on the comprehensive and continued improvement of the performance of Optical Retail against the comparison period as well as further improved net sales growth and EBITDA in Eye Clinics.

I am especially pleased with Eye Clinics’ 6.2% net sales improvement and its remarkable 121% adjusted EBITDA improvement in the third quarter on the comparison period. We have focused on improving customer acquisition, developing cross-sales in our stores and on our cooperation with doctors. As we have earlier noted, the effect of these measures will start to become apparent toward the end of the year. We can already see the first fruits of our efforts in the 9.2% like-for-like growth of the Eye Clinics net sales - the first time it has grown since first quarter of 2018.

The net sales of Optical Retail also grew strongly, improving 11.0% against a strong comparison period – this is the highest growth percentage since 2017. The growth is founded on successful marketing measures, which have led to increased customer flow, as well as excellent customer service in the stores. One important growth enabler is active sales management, which we have actively worked to improve in the past months. Increasing the management resources has made it possible to monitor and manage sales performance in greater detail on a day-to-day basis. In accordance with our strategy, we have started to expand our sales channel mix – in this quarter we have continued to strengthen the role of our online store and boosted the role of our call centre as a booking and customer service channel.

The programme to boost efficiency, which we announced earlier this year, is making faster-than-expected progress and we have already almost attained the entire EUR 2 million annual cost savings target. Yet despite meeting the initial target, our work is not finished. We believe we can achieve EUR 1 million in additional annual savings by the end of 2020. The efficiency boosting programme concerns all expense items, including financing items, with the exception of personnel expenses. The largest savings are from customer financing, IT and other administrative services. Thanks to the savings achieved by the efficiency programme we will able invest in strategic improvements, including management work and new sales channels. 

All in all, Silmäasema’s business operations have made excellent progress both operatively and in terms of financial performance. Moreover, we have a clear, new direction, an updated strategy and financial targets for the 2020-2022 period. In line with the strategy, the company’s growth and profitability are based on becoming the customers’ preferred choice and the leading expert in eye healthcare, renewing and growing the eyesight market, and improving performance and profitability. We presented our new strategy to the market at our Capital Markets Day on 18 September 2019. The presentations given at the Capital Markets Day event are available on Silmäasema’s website at http://company.silmaasema.fi/fi/CMD2019.

According to the latest public information, Coronaria’s holding of Silmäasema was about 89,5% on November 7, 2019. We are very positive about the cooperation with Coronaria. Together we will have a much stronger position for developing operations and identifying best practices especially with regard to the eye clinic business.

The past nine months have been very exciting and we have made great progress in many areas. I want to thank our personnel and doctors for the results we have achieved so far and our customers for their trust. We are now very well positioned to continue profitable growth in accordance with our new strategy.”

Audiocast and conference call for analysts and media

A briefing for investment analysts and the media will be arranged on Friday 8 November 2019 at 10:30 a.m. EET through a live audiocast combined with a conference call. The briefing will be hosted by CEO Jussi Salminen and CFO Sari Nordblad.

Follow the live audiocast at https://silmaasema.videosync.fi/2019-q3-results

Conference call numbers:

Finland +358 981 710 310
UK +44 333 300 08 04
USA +1 855 857 06 86
Sweden +46 856 642 651

The participants joining the conference call will be asked to provide the following PIN code: 98607462#.

Recording of the audiocast and conference call as well as Finnish audiocast presentations will be later available on the company’s website.

Silmäasema’s next Financial Reporting date

Financial Statements Release January – December                  28 February 2020

Board of Directors

Additional information

CEO Jussi Salminen, tel. +358 40 834 5818, jussi.m.salminen(a)silmaasema.fi
CFO Sari Nordblad, tel. +358 50 552 7247, sari.nordblad(a)silmaasema.fi

Head of Communications and Investor Relations Niina Streng, tel. +358 50 322 5195, niina.streng(a)silmaasema.fi

Silmäasema is a Finnish company, which offers all products and services for optical retail and eye healthcare nationwide. Silmäasema is the largest private eye clinic provider offering eye surgeries and the second largest optical retail chain in Finland. The Silmäasema chain has nearly 150 stores and 13 eye clinics in Finland as well as eight stores in Estonia. The Silmäasema chain employs over 1,000 eye healthcare professionals. The Silmäasema Group’s net sales were EUR 122.9 million in 2018 and adjusted EBITDA was EUR 11.8 million.