Earnings Call: H1 2021

Aug 3, 2021

Good evening, and welcome to the Societe Group's First Half twenty twenty one Results. This call may contain forward looking statements relating to future events and operating, economic and financial results for the Sakhilo Group. Such forecasts, due to their nature, imply a component of risk and uncertainty due to the fact that they depend on the occurrence of certain future events and developments. The actual results may therefore vary even significantly to those announced in relation to a multitude of factors. Today's participants are Mr. Angelo Trocchia, Chief Executive Officer Mr. Gerd Gresler, Chief Financial Officer and Ms. Barbara Ferrante, Director of Investor Relations. I will now pass the call over to Mr. Angelo Trotia, Chief Executive Officer. Mr. Trotia, you may begin, sir. Hi. Thanks very much, and good evening to everyone. And thanks all of you for attending today's conference call on the Safilo Quarter 2 Trading Update and H1 2021 results. We are very pleased that the second quarter continued the solid sales and profitability momentum of the 1st 3 months of the year, allowing us to close the first half of twenty twenty one with a significant year on year rebound, but even more meaningfully growing well above the H1 2019. In the period, we continue to size the business opportunities that our renewed brand portfolio offers us in our key markets. Throughout the 1st 2 quarters of 2021, our business performance was consistently driven by the strength of our key strategic pillars. We benefited from the successful rebalance of our brands portfolio, which has so far unload for the full offset of the business terminated at the end of 2020 through our acquisitions of Blender's and Privilego and the new recently introduced licensed brand of Levi's, David Baker, Missoni, Port Isabel Maran and Under Armour. This has been the main objective of our action plan during the last few years, the effective implementation of which is now permitting us to bring home a positive performance of our core business. In the 1st semester, we in fact benefited from the significant organic growth achieved by the brand already in our portfolio, meaning our comparable business was up high single digit, a result which was broad based from Smith's strong outperformance across all its category, a big thanks to the Smith team, across all its category, channels and geography to Carrera and the main license of Google Boss, Tom Ylfiger, Kate Spade and Jimmy Choo all firmly exceeding 2019 levels. For the 4th consecutive quarter in a row, our path of recovery was led by the significant rebound in the consumption experienced in the United States, a market which is certainly performing better than any expectation. And I think the team over there is doing quite a great job, but also by the rigorous progress we kept recording in China, Australia and in most of the Middle Eastern markets. Also in the Q2, our sales growth came largely from prescription frames, the product category which has best sustained the industry during the depth of the pandemic and which is still today outperforming alongside our winter and summer sports products. Our sales of sunglasses, which continue in the second quarter to be held back by the pandemic related restriction, which persisted in many crucial European market at least until May. Benefited on the other hand from the strength of our online channel, which grew a strong double digit also in the Q2, thanks to the business momentum of Internet Food Player as well as the B2C digital sales of Blenders and Smith. Let's then look at the KPIs of our 2nd quarter trading update. As expected, our business performance in quarter 2 recorded an exceptional year on year rebound of growth with sales and profit doubling or tripling compared to the extremely small business and the losses we recorded in the Q2 last year, the one most heavily weighted down by the COVID-nineteen pandemic. Our comment will so mostly refer to other performances compared to the same period of 2019, the most meaningful benchmarks to measure the health of our business and the progress of our operational execution. Our net sales in quarter 2 were up by 9.4% at constant exchange rate versus quarter 2 2019, posting a sequential acceleration compared to the 6% we reported in the Q1 of the year. Our quarter 2 adjusted EBITDA reached €23,800,000 and the margin on sales of 9.2 percent, not far from the double digit level we achieved in the 1st quarter and 70 basis points better than the margin of 8.5% we recorded in quarter 2 2019. The sum of the 2 quarters was a solid H1 in which the very robust sales growth and the structural cost reductions we have been implementing delivered a significant recovery of the profit. In H1 2021, our total net sales reached €510,700,000 reporting a growth of 7.7 percent at constant exchange rate compared to H1 twenty nineteen. Our first half adjusted EBITDA was just short of €50,000,000 10% margin, precisely at €49,700,000 at 9.7 percent adjusted EBITDA margin, a result which granted us a +20.5 percent increase in value and a 140 basis point margin improvement compared to 2019. Very meaningful for us, the semester was back to a small adjusted group net profit of €4,400,000 which compared with the adjusted loss of €63,700,000 recorded last year, while it was below H1 twenty nineteen adjusted net profit of €8,500,000 due to higher financial charges. Now the significant recovery of our operating profitability we achieved in the 2nd period supported what we consider a satisfactory 1st semester free cash flow, which are lower our group net debt at the end of June 2021 to be substantially stable with the position we recorded at the end of last year despite of the cost of the restructuring. I stop here for the moment and hand over to Gerd for some additional details on our economic and financial performance report. Thank you, Angelo, and good evening to all of you connected via conference call and audio webcast. Let me add some color to the main highlights already discussed by Angelo, starting from our net sales performance in the 2nd quarter and 1st semester of 2021. We are on Slide 6 of our presentation. So our Q2 2021 net sales reached €259,400,000 taking the H1 top line to €510,700,000 respectively, up 4.3% and 3% at current exchange rates and 9.4% and 7.7% at constant exchange rates on a 2 year basis. ForEx has been quite a headwind so far for U. S. Dollar denominated sales both versus 2020 and versus 2019. As highlighted by Angelo, key for us this year was and still is the effective rebalancing of our business portfolio in line with our group plan, working on the different important business levers by product category, geography and channel. The foundation for our business model to be successful is a competitive and very appealing brand portfolio and what we're commenting on today goes exactly in that direction after 3 years of portfolio overhaul. Also in Q2 and always in comparison with Q2 of 2019, the negative perimeter effect from the exit of Dior and Max Mara was overcome by the positive impact of the new owned and licensed brands we have been introducing to the portfolio during the last 12 to 18 months. As a reminder, we bought a controlling stake in Prevariable in February last year, while last June marked Blender's 1st year within our portfolio. With regards to our licenses, we launched Neevise, David Beckham and Missoni in the first half of twenty twenty in the midst of the pandemic, Ports in China in July, while Isabel Marant in Q1 this year and Under Armour more recently in this quarter. Focusing then on our organic performance, the one driven by our fully comparable brands on a 2 year basis, this was strong and again leading the high single digit growth we recorded in the peers versus 2019. We'll add some more color on our brands when moving on to our geographical performance. By product category, prescription frames continue to register strong momentum, up by a meaningful double digit also in Q2 and consequently in H1, reflecting the sustained business activity in optical stores, quite broad based by brand and market. Such trends have been supporting our work of shifting more of our business towards prescription frames. The latter accounted for 39 percent of our H1 twenty twenty one sales mix, up from 36% in H1 twenty nineteen. The rebalancing would be clearly even more evident looking at the business ex the acquisitions, which are largely sunglass businesses. Smith's winter and summer sport products were the other winning categories, growing exponentially in Q2 and driving a strong over 80% increase in H1, also boosted by the surge of outdoor activities. Sales of sunglasses, which doubled year on year in Q2, were on the other hand, sales slightly below 2019 levels due to the impacts of lockdown restrictions on retail and travel and to a particularly difficult comp space given the terminated license of high weight of these products. As highlighted by Angelo, our sales of sunglasses in Q2 and in the semester were supported by the strong growth of the product category in the digital channel, clearly driven by the significant contribution of our acquisitions, Blenders in particular, but indeed also by the strong ongoing progress of Smith's renewed digital direct to consumer channel as well as by the outperformance of Internet peer players. Let's have the usual quick zoom into our group's total online business performance in the next slide. At the end of June, our total online business represented roughly 14% of the group's total sales or around €75,000,000 on a constant currency base, with the channel growing 2x and almost 4x compared to H1 2020 and 2019 respectively. For online, the most meaningful comparison to make is with last year as the channel experienced its strongest development indeed in 2020 concurrently with our acquisitions. In H1 2021, the doubling of our total online sales came from the significant addition of Blenders, but also thanks to Smith, up 39% at constant exchange rates and to the revenues generated through the Internet peer players, which increased by 38% in the period. In Q2 of 2021, the group's online business continued to record a strong development, up 64% year on year, still benefiting from the positive perimeter effect of having blenders in the base period just for the month of June. On the other hand, the organic performance of the channel started to normalize a bit in Q2 compared to the extraordinary growth rates experienced last year when online was the only way for consumers to buy, remaining nevertheless very meaningful. Moving to the drivers by geography of our sales performance in the second quarter and first half of this year, we can generally say that on a 2 year basis, Q2 trends were quite consistent with what we recorded in Q1 with some accelerations and decelerations reflecting specific base effects. Starting from what is today our biggest region representing 47% of our total sales, North America was again the key driver of our sales growth. Thanks to the volume consumption trends persisting within the United States to the strong momentum our portfolio is enjoying in the market and today now to our acquisitions. Meaningfully excluding the acquisition, our sales growth in North America accelerated in Q2 to +20 percent from the +17% recorded in Q1, again driven by a wide ranging improvement across brands, product categories and channels. Amongst all, a special mention goes to Smith, whose revenues in Q2 this year almost doubled versus 2019 behind the sizable development of all its product categories through its traditional distribution and more significantly through its renewed B2C channel. Reading out our total reported performance in North America, in Q2 2021, net sales grew 60.3% at constant exchange rates and 50.6% in H1 versus 2019. In Europe, our Q2 net sales recorded a very significant year on year rebound, which was on the other hand still not sufficient to allow our business to match pre pandemic levels and to fully compensate the GAAP generated in the region by the terminated licenses. After a weak start to the sun season affected by the impact of retail restrictions until May and the lack of tourists in key cities in summer locations, sales trends improved in the U. K, Italy and some Nordic countries, but they remained more subdued in markets like Germany, France and Spain and in those channels more exposed to the terminated businesses, in particular, license or owned boutiques, department stores and travel retail. Also in Q2 2021, sales of prescription frames in Europe were up double digits compared to Q2 of 2019, while sunglasses remained subdued also reflecting the still negative trading environment for Polaroid, in particular in some of its core sunglass markets like Spain. In the comparison with the respective 2019 periods, our Q2 net sales in Europe were down 11.4% at constant exchange rates, recording, however, an improvement compared to the decline of 17.8% reported in Q1 of 2021. Overall, in H1, our net sales in Europe declined 14.7% at constant exchange rates, mainly as a result of a very challenging base period for sunglasses due to the terminated businesses and a still patchy business environment. In Asia Pacific, our Q2 2021 net sales recorded a year on year growth of +49.6 percent at constant exchange rates and an almost equal decline of 48.5% in its comparison with Q2 2019, a very tough pace period as travel retail was particularly strong then and as we know heavily exposed to the terminated business. In the Q2 of this year, sales trends in Asia Pacific were highly divergent reflecting on one side the ongoing rebound of China and Australia, up respectively 21% 12.4% versus Q2 of 2019, thanks to a supportive business environment where we could effectively relaunch our brand portfolio and on the other, the still highly subdued travel retail business at many other markets in the regions still affected by the pandemic and lockdown restrictions. In H1, our net sales in Asia Pacific declined 39.1% at constant exchange rates. Finally, in the rest of the world, Q2 was another supportive quarter for the group's business recovery and growth with our net sales in the region recording an exponential rebound compared to last year's extraordinary decline and a +4.9% compared to the same quarter of 2019. Both Middle Eastern markets and core Latin American countries, Mexico in particular, contributed to the upside of the period, while our total H1 performance in the area equaled the growth of +14.4 percent in the comparison with H1 2019. Let me now move to our economic and financial performance, Slide 10, building on the highlights already provided by Angelo. I would say that the Q2 was similar to what we saw in Q1, more sales, better operating leverage as sales volumes increased, additional progress on our cost efficiency plan accelerating now also at the cost of goods sold level, but also as expected an acceleration of some SG and A investments and higher inflationary pressures. Let me give you an update on our total structural cost savings in these 1st 6 months. These amounted to around €13,000,000 with just under €9,000,000 on COGS, which as I said had quite a significant acceleration in the Q2. In the 6 months, we also had some €4,000,000 of cost avoidance in relation to the contingency measures still in place due to the COVID-nineteen emergency. In the period, we incurred some additional non recurring costs mainly at the gross profit level and depreciation for the write off of manufacturing assets in relation to the closure, which occurred as expected in June of the Ormos production plant in Slovenia. Total non recurring costs in the 1st semester equaled €19,300,000 and as said these were mainly related to our industrial restructuring plan. As you will probably have read on the 22nd July, the French Competition Authority following the investigation initiated in 2,009 regarding a number of alleged practices in the eyewear sector in France dismissed all the charges which had been raised against Safilo and which we have been vigorously challenging. We are clearly very happy with this decision, which meant that no sanctions were applied to Safilo, thus allowing us to release the provision for risk and charges equal to €17,000,000 which we booked in 2015 in order to cover the potential estimated liability. This release has had a positive impact on our reported Q2 and H1 2021 results, which is not included in our adjusted key performance indicators as it is treated as a nonrecurring income. Q222grossprofitrose235,600,000 and to a margin of sales of 52.3 percent, marking an exponential increase compared to the exceptionally low levels recorded in Q2 of 2020. On an adjusted basis, gross profit in Q2 was €3,800,000 higher equal to €139,400,000 and to a margin of 53.7 percent accelerating quarter on quarter versus the 52.2% adjusted gross margin recorded in Q1. On a 2 year basis compared to Q2 of 2019, gross profit was up 2.6% in value terms and down 100 basis points margin wise. And looking at the key dynamics which drove this performance on the positive side, we have the sizable accretive growth of the D2C channel, which is largely but not fully offsetting the double negative impact we suffered in these quarters from the terminated licenses, very high and accretive in the base period yet residual and dilutive in their final depletion periods this year. In the quarter, we had also a quite meaningful positive contribution from lower obsolescence costs, an important component of our structural COGS savings plan, which together with some other manufacturing and purchasing savings supported us in counterbalancing the rise of inbound transportation costs. In the 1st semester, our gross profit reached €262,200,000 up 76.5% compared to H1 2020 with the gross margin which bounced back to 51.3% from last year's 44.3%. On an adjusted basis, H1 2021 gross profit equaled €270,600,000 and a margin of 53%, respectively up 1.7% and down 70 basis points compared to H1 of 2019. Moving down the P and L. Our SG and A cost structure benefited from the recovery of operating leverage led by the strong top line growth and by our now leaner overhead cost structure, which we continue to manage with disciplined cost control. Let me say that as expected and anticipated, we closed the 1st semester of this year with a substantial completion of our original overhead productivity plan of €20,000,000 We had in fact some €4,000,000 additional of structural overhead savings in the 6 months to June. On the other hand, as planned, marketing and advertising expenses reaccelerated compared to Q1 2021, mainly as a result of the expected easing and lifting of the restrictions, which have prevented our core organic business from trading regularly in the 1st months of the year. The acceleration of these costs was quite significant also compared to the Q2 of 2019 as the period represents the peak season for the online business, thus the months in which a great deal of Blender's marketing investments are concentrated. Starting from Q2, Blender's like many e commerce marketers across industries have been experienced advertising price increases on social media coupled with the impact of the recent iOS updates on ad targeting. Quite interestingly, always in our 2 year base comparison, the higher mix of marketing or higher weight of marketing was compensated by lighter royalty expenses in line with our now different brand mix in the portfolio. Briefly on the numbers. In the Q2, our reported EBITDA soared to €37,700,000 as it accommodated the release of the €17,000,000 provision discussed before, which meant more than doubling the profit of €17,400,000 reported in Q2 2019, with the margin jumping to 14.5 percent from 7% in Q2 2019. Q2 adjusted EBITDA equaled instead €23,800,000 compared to the loss of €34,100,000 recorded in Q2 of 2020, increasing plus 12.2 percent compared to the adjusted EBITDA of €21,200,000 reported in Q2 2019. In Q2, our adjusted EBITDA margin increased to 9.2%, 70 basis points higher than the 8.5% margin recorded in Q2 2019. This solid result allowed us to close H1 2021 with an adjusted EBITDA of €49,700,000 posting an increase of 20.5% compared to the adjusted EBITDA recorded in H1 2019. Meaningfully, in H1, our adjusted EBITDA margin was very close to the double digit level at 9.7% of sales, marking 140 basis points improvement compared to the 8.3% adjusted EBITDA margin recorded in H1 twenty nineteen. After D and A, our H1 twenty twenty-twenty one operating result was back to profit of €22,300,000 and to an EBIT margin of 4.4% with an adjusted operating results of €24,700,000 at 4.8 percent of sales, meaning an increase of 85.5 percent compared to the EBIT of €13,300,000 recorded in H1 2019 and an improvement of 2 10 basis points compared to the 2.7% margin recorded in H1 twenty nineteen. Our operating performance in H1 allowed us to close the period with a group net result back to a small reported profit of €2,000,000 while the adjusted net result equaled a profit of €4,400,000 compared to the adjusted net loss of €63,700,000 in H1 2020 and the adjusted net profit of €8,500,000 posted in H1 2019. Below the operating line, net financial expenses equaled €11,600,000 remaining absolutely in line with last year, although with a different mix, driven by higher financial interests and a lower negative impact from exchange rate differences. Financial charges were, on the other hand, higher than the €2,900,000 recorded in H1 2019, mainly as a result of the higher average net debt and of the higher interest on the shareholder loan. Moving to our cash flow in the semester and group net debt at the end of June, slide 14. As already remarked by Angelo, our solid economic performance allowed us to close the first semester with a satisfactory free cash flow, which was driven by the positive cash flow from operations of €10,100,000 which was achieved thanks to a significant recovery of operating profitability, notwithstanding a cash out of around €12,000,000 relating to the definitive closure of the Ormosh production site, with which we took another significant step forward in the execution of our industrial restructuring plan. In the first half of twenty twenty one, we recorded a relatively contained absorption from working capital of €9,400,000 with the net working capital dynamics, which were characterized both by the normal increase of trade receivables and payables accompanying the surge of trading activities and by a reduction of inventories by €6,700,000 In H1, the cash flow for investments amounted to €9,800,000 primarily devoted to the group's current digital transformation and overhaul of its IT infrastructure and to maintenance CapEx for our industrial footprint. In H1, our free cash flow equaled a small cash absorption of €4,800,000 compared to the slightly positive generation of 2 €5,000,000 before the acquisitions of Blenders and Privet Revolve recorded in H1 2020, thanks to at the time strict COVID related cash protection approach. As regards our net debt, at the end of June 2021, it to the €226,900,000, €186,700,000 pre IFRS 16, pretty much stable compared to the position of €222,100,000 or €179,000,000 pre IFRS 16 recorded at the end of December 2020 and the position of $223,900,000 or $181,300,000 pre IFRS 16 recorded at the end of March this year. If we look at the key components of the group's net debt position at the end of June, we moved from a gross debt of €298,100,000 of which €40,200,000 was the IFRS 16 impact, €96,500,000 the shareholder loan for the acquisitions €108,000,000 the term loan facility guaranteed by Sanjay and €55,000,000 the renegotiated term loan facility signed in 2018. We then closed the semester with a cash position of €71,200,000 and our €75,000,000 revolving credit facility undrawn. I stop here and I hand over to Angelo for his further remarks on the business evolution after the closure of the semester. Thanks, Gerd. There are certainly a number of important developments in our business, and I would like to briefly update you on it. Starting from where we stand with our U. S. Safilo B2B e Commerce platform, which was officially launched this time last year in Europe and which represent a key investment in our digital transformation strategy. When it comes to our customer centric strategy, improving heavily the relationship with our clients. So 1 year after its launch, we look at where we stand with this project and what result it is giving us. U. S. Safeco is online in 19 countries, launched first in the Italian market and then followed by 18 other countries in the EMEA region. The number of the registered customer increased by 80% to our old platform last year. And today we have more than 27,000 registered users. Customer care has also been integrated into the platform and today Salesforce Service Cloud is used daily by our entire EMEA customer care organization around 100 people. Now our job is to ensure that those customers who have already started using Johan Safilo use it as the main channel to work with us for all of those activities that they can do conveniently from their shop in total autonomy and of course to keep tempting the customer who have not yet registered to do so. In the 1st semester of 2021, orders in value through our new and software platform increased by more than 60% compared to H1 2019. To be noted, also thanks to the recent digitalization of warranty return in Europe, 50% of the warranty transaction and now move into EU and Safra from the customer care channel, which testify our focus on the continuous upgrade of our ToF sales service. The last major goal we achieved was the digitalization of our return process, which was a 90% physical activity before that. The project is not yet completed and is being constantly updated to always better address the needs of our many different customers. With regards to the major the other major part of our commitment towards a 360 degree digital transformation, the B2C business, Blender is now progressing on its growth and development project to fuel the international expansion outside the U. S. Following the go live of the brand's e commerce business in Canada and in Australia in the Q1 of 2021, Blender will now enter the United Kingdom and Ireland targeting Europe's largest e commerce audiences. Blender's digital and native business model allow us to open the brand fast to new market And that's exactly in line with our strategic plan to fuel the growth potential of such an amazing brand, not only in North America, but also outside North America. At the same time, we continue to work to reshape our brand portfolio with targeted additions that will allow us again to gain a leading position in the various eyewear segment and references market. After having signed with this Square in May, a few weeks ago, we announced a new partnership with Carolina Reina, an iconic fashion luxury brand valued worldwide for the extreme elegance and femininity of this product, which represents a great, great addition to our portfolio and a significant immediate opportunity to strengthen our women proposition and to effectively counterbalance some recent brand exit. Carolina Herrera is already a regional brand in the Iowa sector and it will strengthen our portfolio in particular in Spain and in Latin America market, while we will be working to strengthen the event image and geographical reach, thanks to our product design and distribution capabilities. Now before concluding our presentation, I'd like to give you an update on the most recent performance of our business. In July, our total net sales performance was again strong with the U. S. And China remaining the market with the highest growth momentum. So our better than expected H1 2021 results and the continuation of the positive trends into the beginning of Q3 allow us to look with optimism at the growth prospects for the current year, consolidating our ambition to exceed already in 2021 the pre pandemic business level of 2019. We now expect the group's full year 2021 net sales to grow mid single digit at compound exchange rate compared to 2019. Adjusted EBITDA for the year is also forecasted to surpass 2019 levels. Clearly, it is important to underline such expectations are based on the assumption of a stable business environment with no further significant COVID-nineteen related restriction to be introduced in the second half of twenty twenty one. As you will have read a few days ago, the Externally Shareholders Meeting approved the share capital increase we announced at the end of June for a maximum amount of €135,000,000 aimed at the early repayment of the subordinated shareholder loan of €90,000,000 provided by Hal last year in order to finance the 2 acquisitions in North America. The objective of this repayment is to provide our group with a more cost efficient financial structure to support us on the path of recovering a solid and sustainable operating but also group net performance. The share capital increase is also aimed at harder strengthening our capital structure, supporting our future development by external lines. Taking into account the performance of the business and the market situation, we believe that the condition exists today for this capital increase, with which we have the opportunity on one hand to pursue with the termination our consolidated cost saving program considerably limiting financial charges for the next 5 years and on the other hand to further enable our growth strategy with additional resources and new strength. The share capital increase is supported by Hal, which we will subscribe the option rights related to its existing holding and subject to an agreement with the company on the issue price, any new shares, which would remain unsubscribed after the offer in option and the subsequent offer on the stock exchange. We believe in the work we are doing in Safilo and we believe that we are moving in the right direction to catch future opportunities for the group. As we have been discussing, the strategy we outlined in December 2019 in our group business plan 2020, 2024 are all up and running. And their implementation is today effectively supporting us in recovering from the negative effects of the pandemic and in continuing to pursue our 2024 sales economic and financial targets, which now also include the effect of the acquisition of Priverio, the new license signed in 2020 2021 and the expected proceeds of the capital increase. This concludes our presentation, and we are now ready to take any of your questions. Thank you, sir. The first question is from Cedric Rossi of Bryan Garnier. Please go ahead. Yes, good evening, everyone. Actually, I have three questions. The first one is regarding your so your implied outlook over the second half of the year. So I understood that you were expecting a relative normalization in H2. But since the U. S. And China are still driving the growth, how do you expect Europe and Asia to behave in the second half, assuming that we saw some new lockdowns in Australia? So I was wondering how you were seeing Europe and Asia behaving in the second half of the year? My second question relates to the marketing expenses. So I understood that you were you had some pickup in marketing expenses in Q2, also probably related to the launch of Blender Siwear in the U. K. So I assume that we can expect these cost expenses, these marketing expenses to continue to increase in Q3 and Q4. So could you confirm that? And my third question is regarding the prescription and the performance in the prescription category. So of course, the COVID had driven this category. But what did you change in your strategy or in the go to market approach to really sustain that growth? Because in the past, Safilo was, let's say, quite weak in that category. So what did you change in the marketing strategy or in the commercial strategy to really have this very strong performance? Thank you. Okay. I will answer to the 3rd question, then I leave Gail to answer to the first two questions. Prescription categories, I think we did 2 important things. First, we have been revisiting our portfolio. So we have been enriching the optical bit of our collection. This has been option number 1. Just to give you a concrete example, we have launched a full range of Polaroid prescription, which is flying, where before Polaroid was fundamentally a brand which was only some. Today Carrera is becoming almost a fifty-fifty brand between prescription and sun, and that was not the case before. So first action worked on the portfolio with new launches and or sorry, new part of the collection or rebalancing the collection. This is action number 1. Action number 2, we have been doing the last 2 years quite some enhance of the sales force because selling optical product, you need a little bit of different set of capabilities. So we have been trained almost all our sales force repeating or improving or teaching them how important are some characteristics when you go to the optician and you sell optical product versus when you sell some product driven by the license. So 2nd dimension, training on the sales force. 3rd dimension, the step improvement of the level of service because more you move toward optical product, prescription product, more the level of service becomes crucial. And here, especially in Europe, the implementation of the new B2B and the new focus on the customer care has been a crucial bit to rebuild the trust with the customer. We have done now for 2 years in a row a customer service and we keep improving for the 2nd year in the row the judge and the score that the customer are giving us. So three elements, enlargement of the collection, training on the sales force, step improvement of the customer level or the service level. I pass to Gerd. Okay. So on the first question on the implied or the outlook for the year, I think we wanted to give an outlook as to how we see the rest of the year coming in. We do still take, let me say, a prudent stance on this outlook considering the macroeconomic scenario is still quite uncertain. I think Asia, we see quite a difficult market environment, to be honest. I mean, other than China, most of the Asian markets are still in lockdown or like Australia are going again into lockdown, vaccination rates are low, etcetera. So I think the Asian recovery in the second half is still going to be challenging. Somehow also in Europe, I mean, we do have a better performance from local consumption. We see that clearly in the prescription France performance, but we are still missing, let me say, the tourists that used to be a big and important driver of the business. So looking at H2 and always looking at versus 2019, let me say we do have some base period effects. Of course, not only did we have terminated businesses Dior and Max Mara, which were stronger in Europe than in other parts of the world, plus now also Findlay. As you know, the Findlay license has ended on the 30th June. And so we do have some base period effects that are impacting more in Europe when it comes to growth along with the typically lower seasonality of the business in H2. On the North American side, so far, we do see a very good trend that continuing. I mean, I have to say that the H1 performance of Smith has been quite extraordinary. It's a great supporter of our growth. We do expect Smith to keep growing also in H2, but possibly at a different magnitude of what we saw in H1. So we decided all considered to take a reasonable stance on the year. With regards to the question on marketing, let me say, I mean, it's a good thing that now that we have more own brands, we are spending more in marketing in building our own brands rather than on licenses for licensing the brands of others. Clearly, the peak period for marketing investments is the summer months. This is now even more true for us compared to the past significantly because of Blender. So here we have, as you know, much higher gross margin, but much higher marketing expenses, which are concentrated in the peak months. So let's say May, June, July and to some degree August are the most important months. So we will continue seeing these kind of marketing dynamics also in the Q3. The U. K. Launch on Blenders is pretty much new. I mean we started really in July. So I wouldn't expect this to be a significant contributor yet in the Q3 or Q4 when the seasonality changes. But going forward, clearly, the expansion of the direct to consumer business of blenders globally will also lead to higher marketing investments in the overall mix of Safilo. The next question is from Orianna Cardani of Intesa Sanpaolo. Please go ahead. Yes. Good evening, everybody, and thank you for taking my question. The first one is on expected gross margin in the 2nd part of the year. Do you see any specific pressure on gross margin in H2? Or can we assume a gross margin at least at the level of last year in H2? The second question is on expected net debt, ex AEFRS. Without taking into consideration the cash in from the capital increase, which is your target for net debt by the end of the year? And how much cash out for restructuring cost and for working capital do you incorporate in it? The third question is on Blender. In the press release, you said that the new licenses and the acquisition purely offset the business that terminated at the end of 2020. Can you quantify the amount of this business terminated? And how much is the contribution of lenders? And can you give us an idea of potential revenues in 2020 2 2023 for Glendors coming from its international expansion out of U. S. A? And finally, you stated that the capital increase is aimed also to support opportunities that may come in the sector. So what kind of company may be an ideal target of acquisition for you in terms of market and stage of development? Thank you. Okay. I'll start from the last one. Looks I need to start always from the last one last question. Look, Can't increase opportunities? Yes. The opportunities, I think that we have outlined a very clear strategy in when we presented the strategic business plan. And the 2 strategic directions are D2C and prescription area. As you remember, we were a company which were 70% some 30% optical or prescription, Clearly, strategically said, we cannot be like this because we are completely different from what the market is. So we have defined like to grow on prescription in a heavy way compared to the sun. So our potential target needs to be all in the D2C arena because I think that there is space there and we are currently at 14%. But I think there is an opportunity to go higher as a percentage of our total top line. And the other dimension is optical because I think that we need to strongly shift our portfolio from being a seventy-thirty company to a fifty-fifty company. Just already to give you a reference this year, I think we will be a sixtyforty company. So we will start having a more balanced portfolio. But the two priorities, B2C and Optical. So any target which fits along these two directions. On Blender, then I leave to Gerd. Blender, clearly, when we bought Blender, Blender is a 98% B2C company. It will stay like this. I think still there are great opportunity in U. S. Because I think U. S. Remains the biggest market. And if you look to the number, it's a market which keeps growing, especially in sun because part of the sun strategically is moving on the D2C. So blenders is going today out of it. But obviously, the international expansion is another huge opportunity of blenders. So we have started with Canada, we have started with Australia, now we are coming to Europe. And obviously, there is all the Hispanic world speaker, which is another big next step of expansion. So I don't think we should give a number, but and then I leave to Gerd, but probably it's going to be a crucial bit out of the blender strategy, the weight and the strength of the international expansion and you will keep hearing from us more and more in this direction. Gerd? Yes. So I think maybe just completing the perspective on that question, I mean we do not comment, let me say, on individual brand numbers or individual parts of the portfolio. What I can say is that at the end of 2019, so when we had all that terminated business in our base that was roughly €200,000,000 And our ambition is that over time with the M and A and with the addition of the new licenses, we can offset that. This is what has happened in the 1st semester of 2021. Clearly, there is a bit of a different profile of seasonality with the D2C business. But in 20222023, our ambition would be to basically offset what used to be that block of the business back in 2019. With regards to the gross margin, I think that we should have a good opportunity to be above the numbers of 2020 2019 in the second half of the year. I mean we had 51% now in H1 adjusted close to 53%. So I think here we should have the possibility to be above 2 years ago, especially in Q4 where we had some quite low gross margins in the base periods. I would expect additional cost of goods sold savings to be delivered in the period. We do we are facing, let me say, also quite an impact from rising transportation costs, so both on the route from Asia to U. S. And Asia to Europe. And we think that this will persist. And we see a risk to a lesser extent that there may also be some inflation on the raw material side. So we will have cost savings, and we are looking at some potential risks to offset. But I think all in all, we should be able to deliver or exceed the gross margin in H2. With regards to the net financial position, I mean, let me comment excluding the capital increase then you can obviously easily add the €135,000,000 against that. I would expect that the net debt at the end of the year will be higher than the net debt that we recorded at the end of June, which means de facto a free cash flow negative for the rest of the year just as we also had in the first part of the year. On the one side, we do have a lower business seasonality. So the level of revenues in H2 is seasonally always lower. So there will be lower operating flows than what we saw in H1. I would expect a higher absorption from net working capital because we will see possibly a bit of a reacceleration of inventory levels. We have quite a favorable effect in H1. But as we also start going towards the inventory for the new January 2022 releases, we will probably see some rebalancing on the stock. Receivables and payables will obviously depend on how the business will perform, but we should probably see some reduction there. On CapEx, we saw about $10,000,000 in H1. I would expect another more or less $10,000,000 in the rest of the year. So that's something quite similar. But at the end of the year, I do expect to close 2021 with a negative free cash flow, which was always expected as this was a year in which we are executing a lot of the restructuring. We mentioned the cash out of $12,000,000 in the 1st semester. And clearly, we still have some way to go on completing the restructuring depending on when that will also be possible within the legal framework especially in Italy. So I think in terms of restructuring, we are, let me say, I would say maybe 80% there in terms of what is to be accrued on the P and L as you know because of delays in the implementability of some of those plans. I would say that probably we are about halfway through on the cash side respective to the overall restructuring envelope that we announced in 2019 of about €50,000,000 at the time. The next question is from Domenico Ghilotti of Equita. Please go ahead. Good afternoon. A few questions. The first is a follow-up on blenders, in particular, blenders in the U. S. And since that Q2 had a quite significant slowdown on a tough comparison, clearly. But I wonder if you still see huge opportunities also in the U. S. Market for blenders or if you are seeing some kind of, let's say, I'm going to say, maturity or saturation on the market? 2nd, a follow-up also on the gross profit question. So if I look at Q2 compared to Q1, so the decline of the gross profit despite higher sales, can you clarify what has been driving this dilution? And how are you managing or if are you managing some price increases, price hikes to offset the logistic costs that you were mentioning? And the last is on UN Safilo that you mentioned in the beginning. I would like to understand what is the size that has been reached today because you were mentioning particularly the strong performances from businesses that joined you and Safilo? Sofia speaking. I would like to answer to the first and the last. Blenders, no, I mean the slowdown of blenders is definitely not related to a less first of all, let's be clear that we compare Q2 this year with the Q2 of last year, which was an abnormal growth. So this is the first point. 2nd point, no, there is no slowdown of the market in U. S. The slowdown that we have been suffering with blended is related and by the way, it's common to quite a lot of B2C company is related to the change of the privacy policy, the same as iOS 14, which clearly has put some challenge on how easy or let me say how expensive is to reach the same customer the customer base. So I mean now Blender is recovering. They are trying to they are funding their way out of this new world, these new routes of engagement due to the change in the policy, in the privacy policy, but it's just a transitional effect. Absolutely, there are big opportunities still in the American market with no doubt. So the growth opportunity remains U. S. The international expansion is just an add on completely additional top line compared to the North America business. The other question, if I understood correctly, was on the B2B, right? The question was from where the business is coming or where the growth is coming. I mean, let's be very clear. The B2B is not intended to substitute the agent and the sales force. The B2B logic is from one side to make to keep improving the service level that we are able to deliver to the customers. I was mentioning a digitalization we are doing on the return digitalization that we are doing on a lot of operation that makes life easier to the customer that this is part of, let me say, the scope of the B2B. The most interesting part, if you like, is to make the life of the customer so easy that he can sell more. And so it will translate in additional sales. We see that is happening a strong shift of the traditional customer care on the B2B. So the customer instead of ringing the customer care does the operation directly on the website because it's easier, it's more effective and is more fast responding. This is an effect. But the other effect we see is that for the customer it becomes easier to buy, becomes easier to reorder. It has all the information in what we call in one click. It gets all the content. So it's really helping the customer in selling more. And honestly, this is the real effect in which we are that we are seeing in the number and this is the real effect that the B2B should give us on the sales side. If you like, it's changing the experience of the customer. Before our system was very complex to use, now it's very easy. Before it was very slow, now it's very fast. But it's really changing the relationship because we are able to do really to build the sort of daily relationship with the customer, helping the customer in understanding what is the product that is the most sold, helping the customer giving him the content on that different brand. So it's a completely sort of change in the journey in the relationship between the customer and the company. And I think that, that is where the really big value is there. We are seeing the first sign of a very positive effect. I'm expecting more moving forward. And for us, we remain one of the fundamental projects. As I told, we have rollout in Europe for 2022 priority will remain Europe and then we will move also we will implement all these also in U. S. Okay. And back to Gerd. So on the gross margin, so what we're seeing is a Q2 gross margin, which is higher than the Q1 gross margin we recorded this year. So we've made, I think, a step forward. It is right that compared to 2019 gross margin, we are still below in both quarters. I would say there are 3 different main drivers. I would say one is what we called also before this double negative on the licenses, on the terminated businesses, clearly in 2019, we had regular business as the licenses were in force. This year, we had a lot of the closeout business. So not only is the weight of those luxury licenses, which have always an accretive gross margin less than it was. But on the other side, there's also the dilution of the last month of the agua close-up period. Secondly, we were commenting on a very strong performance of Smith, which we're very happy with. It is very good for our bottom line. But on the other hand, we do have a dilutive gross margin there as the categories are a little bit different with helmets and Volvo. So that is simply a portfolio mix effect that we see. And last but not least, I mean, we estimate that the increase in transportation cost that we have seen is weighing on us with about 150 basis points on the gross margin. Clearly then we have cost savings that we deliver, which are offsetting that. But with the cost savings clearly, we would have liked to get ahead. So the dynamics will probably be different in the second part of the year. So we should be able to get ahead of where we used to be in the last couple of years in H2. It will depend on how these cost dynamics and inflation dynamics will continue. We clearly have our cost savings program that we expect to continue and we are also looking at pricing potentially to take some very calculated interventions depending on which brand country combinations offer us the opportunity in order to address that. I mean looking ahead, I think as a company, we have now a very efficient overhead cost structure in place. So the OpEx fixed part I think is quite efficient. So the leverage of the incremental sales is benefiting us quite nicely where we do have the opportunity to get further ahead. And I think also if you look versus our competitors who are publishing their numbers, it's clearly in the gross margin. So over the next couple of years, we will continue to work on our gross margin. Okay. Thank you. So when you give the guidance, if I'm not wrong, the you are comparing the constant ForEx and I presume that the current spot rate, we should add something like so €50,000,000 to €60,000,000 of FX headwind on the guidance. On the net sales? Yes. Yes. I think that's about right indeed. Okay. Thanks. The next question is from Francesco Brili of Intermonte. Please go ahead. Yes, good evening. Thanks for taking my question. And first, quick one on just level of prices. If you are just a follow-up from the previous one on gross margin. If you are seeing and if it is conditional guidance price increases during the 2nd part of the year? And if so, which timing should we assume for the pass through of these price increases? Yes. I think this is always a tricky topic to answer on a public conference call. Let me put it this way. I think we are looking at the pricing topic. We are looking at it where we see opportunities within our collection structure, within the different brands and the different geographies where we see also from a, let me say, competitiveness and value equation point of view the opportunity to do so. So this is something that we are looking at, but I will decline to Gentlemen, Mr. Ferrante, there are no questions registered at this time. Okay. Thanks very much. Thanks to everyone and have a nice evening. Thanks very much indeed. Bye bye. Thank you. Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephone.