2014 Annual Shareholders` Meeting

Combined Ordinary And
Extraordinary General Meeting
Paris, May 7, 2014
Palais des Congrès
1
Combined Ordinary And
Extraordinary General Meeting
Hubert Sagnières
2
Quorum provisoire
ACTIONNAIRES
Votes par
correspondance
Présents et
représentés
Total
Quorum requis
- 20% du capital pour l’AGO
- 25% du capital pour l’AGE
- Taux de participation :
%
3
ACTIONS
Documents et renseignements prévus par les dispositions législatives
et réglementaires, déposés sur le bureau de l’Assemblée
1.
L’avis préalable publié au BALO des 28 mars et 11 avril 2014 , l’avis de convocation publié au
QUOTIDIEN JURIDIQUE le 18 avril 2014 et au BALO le 21 avril 2014, la copie de la convocation
adressée aux actionnaires nominatifs, les copies des lettres adressées aux actionnaires nominatifs,
les copies des lettres adressées aux Commissaires aux comptes et aux membres du Comité
d’Entreprise d’Essilor avec les accusés de réception
2.
La feuille de présence de l’Assemblée à laquelle sont annexés les pouvoirs des actionnaires
représentés par des mandataires et les formulaires de vote par correspondance
3.
Les documents adressés aux actionnaires sur demande avant l’Assemblée :
 Ordre du jour et projets des résolutions
 Rapport de gestion du Conseil d’administration
 Rapport du Président
 Rapport des commissaires aux comptes
 Comptes sociaux et comptes consolidés
 Rapport des commissaires au comptes sur l’augmentation de capital intervenue fin 2013,
au titre du Plan d’Epargne Entreprise
 Tableau des mandats des administrateurs
 Tableaux des délégations, pour réaliser des opérations sur le capital, en cours de validité
 Bilan social
4
AGENDA
5
Agenda
ORDINARY RESOLUTIONS
1. Approval of the Company’s financial statements for the year ending
31 December 2013
2. Approval of the consolidated financial statements for the year ending
31 December 2013
3. Allocation of earnings and approval of the dividend
4. Approval of related party agreements in compliance with Articles
L.225-38 of the French Commercial Code
6
Agenda (continued)
ORDINARY RESOLUTIONS
5. Renewal of term of office: Mr Philippe ALFROID
6. Renewal of term of office: Mr Yi HE
7. Renewal of term of office: Mr Maurice MARCHAND-TONEL
8. Renewal of term of office: Ms Aïcha MOKDAHI
9. Renewal of term of office: Mr Michel ROSE
10. Renewal of term of office: Mr Hubert SAGNIÈRES
7
Agenda (continued)
ORDINARY RESOLUTIONS
11. Shareholders’ advisory vote on the compensation due or awarded
to Mr Hubert SAGNIERES, Chairman and Chief Executive Officer,
for 2013
12. Directors’ fees
13. Authorisation granted to the Board to buy back Company shares
8
Agenda (continued)
EXTRAORDINARY RESOLUTIONS
14. Authorisation granted to the Board to proceed with a reduction in
capital by cancellation of Company shares.
15. Authorisation granted to the Board to proceed with an increase in
the Company's capital by issuing shares reserved to the members
of a Company share savings plan, waiving the preferential
subscription right.
9
Agenda (continued)
EXTRAORDINARY RESOLUTIONS
16. Delegation of power granted to the Board of Directors to issue
securities giving immediate or later access to the Company’s
capital, preserving the preferential subscription right.
17. Delegation of power granted to the Board of Directors to issue
securities giving immediate or later access to the Company’s
capital, waiving the preferential subscription right, but with an
optional priority period.
10
Agenda (continued)
EXTRAORDINARY RESOLUTIONS
18. Delegation of power granted to the Board of Directors to increase
the amount of the issues of securities giving immediate or later
access to the Company’s capital in case of excessive demand.
19. Possibility of using shares issued without preferential subscription
rights in payment for one or several contributions in shares.
11
Agenda (continued)
EXTRAORDINARY RESOLUTIONS
20. Delegation of powers to the Board of Directors to increase the
Company's capital by issuing shares and/or securities giving
access to the Company's capital and/or issuing securities with
rights to be awarded debt securities, in particular, to qualified
investors or a limited circle of investors, in the framework of an
offer, as outlined in Article L.411-2, II of the French Monetary and
Financial Code, and therefore without preferential subscription
rights
21. Delegation of power granted to the Board of Directors to
implement the issue of Company shares and/or securities giving
immediate or later access to the Company’s capital with
suppression of preferential subscription rights, to set the issue
price in accordance with rules set by the General Meeting up to a
limit of 10% of the capital per year.
12
Agenda (continued)
EXTRAORDINARY RESOLUTIONS
22. General limitation on authorisations for proceeding with a security
issue giving access to the capital immediately or later,
with suppression of the preferential subscription right or reserved
for contributors in kind.
23. Delegation of power granted to the Board of Directors to increase
the Company’s capital by incorporating reserves, benefits,
premiums or other admissible forms of capitalisation.
13
Agenda (continued)
EXTRAORDINARY RESOLUTIONS
24. Amendment of Article 14 of the Articles to modify the duration of
the Directors’ term of office.
25. Amendment of Article 12 of the Articles to set the appointment
rules for Directors representing employees in accordance with the
provisions of the Law of 14 June 2013 on employment protection.
14
Agenda (continued)
EXTRAORDINARY RESOLUTIONS
26. Powers to carry out legal formalities relating to the resolutions
adopted by the Ordinary and Extraordinary General Meeting
15
2013 Performance
2014/2015 Perspectives
Laurent Vacherot
A solid
core competency
2013: Another Year of Growth
2012
Revenue
(growth at constant exchange rates)
€4,989m
2013
Growth
+5.4%
€5,065m
+1pt
Contribution from operations
(1)
€893m
+2.6%
€917m
17.9%
As a percentage of revenue
Earnings per share
37%
36%
Volume market share
€2.80
18.1%
+0.7%
€2.82
€ 2.96
Adjusted earnings per share
Dividend per share(3)
€0.88
+6.8%
€0.94
(1) Operating profit before compensation costs of share-based payments, restructuring costs, other income & expense and goodwill impairment
(2) Restated for 2013 one-off effect and net of currency effect
(3) Submitted to shareholder approval at the May 7, 2014 Annual General Meeting
18
(2)
2013 revenue growth by segment*
Lenses & Optical
instruments
+5.3%
Readers /
Non-Prescription
Sunwear
+6.4%
Equipment
+5.8%
* like-for like and bolt-on acquisitions combined
19
2013 revenue growth by region*
Lenses & Optical
instruments
North
America
+5.3%
Europe
+1%
+3%
Fast-Growing
Markets
Asia/Pacific/
Middle East/Africa
+12%
Latin America
+20%
* like-for like and bolt-on acquisitions combined
20
+20%
Growth supported by three key development directions
Innovation
Global
development of
new business
activities
Acquisitions and
Partnerships
1
-Readers
-Sunglasses
-Equipments
-Online
6
12
3
1
5
28 partnerships in 2013
21
Controlled debt coverage to finance strategy execution
 Good ratings of Essilor Group (Standard & Poor’s…)
 Ratios in line with our ratings
- Net debt / EBITDA
- Net debt / Equity
 Successful bond issue
 Fast debt recovery
22
Robust Performance over the Past 4 Years
Revenue
Contribution from operations(1)
(in €m)
(in €m)
5 065
917
593
3 268
2009
2013
2009
EPS
Cash Flow(2)
(in €)
(in €m)
2013
912
2,82
586
1,89
2009
2013
2009
2013
(1) Operating profit before compensation costs of share-based payments, restructuring costs, other income & expense and goodwill impairment
(2) Cash Flow = Operating cash flow excluding change in WCR
23
A robust first quarter
 Stepped-up
expansion in FastGrowing Markets and
rebound in the US
In € millions
77
31
+ 6.0 %
- 61
- 4.8 %
+ 2.4 %
 + 8.4 %
1 323
1 276
 Success of the Crizal
Prevencia and
Transitions Signature
lenses
 Transitions Optical
and Coastal.com
integration
Q1 2013
Like-for-like
Growth
Organic
Growth
Currency
effect
Q1 2014
24
Share performance on 3 years: April 2011 - 2014
Essilor
Share Price
Variation
Essilor vs. Indices – Avril 2011/2014 YTD
Since 3
years (1)
+43.8%
Since 6
years (2)
+92.8%
(1)
(2)
Since April 2011
Since April 2008
Updated information on the evening of 29 April
25
Dividend Per Share*: +6.8% to €0.94
0.94*
Total payout (in € millions)
Dividend per share (in €)
0.88
Payout ratio
0.83
0.85
0.70
0.62
0.66
37.5%
129
137
172
185
177
198
147
33.5%
31.7%
2007
2008
2009
2010
2011
* Submitted to shareholder approval at the May 7, 2014 Annual General Meeting
26
2012
2013*
Strengthening our
core business
Adding new
sources of Growth
Five Key Areas of Focus for 2014/2015
Fast-Growing
Markets
Sunwear
2014-2015
Growth
Transitions
Profitability
28
Successfully Integrating Transitions Optical
Brand
Premium/Mid-tier
Innovation
Worldwide Distribution
 Lift the contribution margin to c.19.5 % by mid 2016
(1)
(2)
(1) Contribution from operations (operating profit before compensation costs of share-based payments, restructuring
costs, other income & expense and goodwill impairment) as a percentage of revenue
(2) Before Coastal.com and new strategic acquisitions
29
Fast-Growing Markets: 2.8b of revenues by 2018
FGM revenues
2018
€2.8b
2013
2011
€0.7b
€1.1b
20 % p.a.
Source : Essilor International
30
Shape the Internet channel for the benefit of the
entire industry
Online Sales Growth
A Fragmented Industry
Revenue in € billions
2018
5.6
6%*
CAGR: 14.2%
2005
1.0
2%*
* As a percentage of the total optical retail market
Source: Estin & Co
31
Technologies
Mid-term perspectives
• 2 years of Double Digit revenue growth
(1)
By mid-2016
• With contribution margin from c.18% to c.19.5%
(2)
(3)
• Reach an organic growth of at least 5%
• Build strong business in Sun and Fast-Growing Markets
By 2018
• Invest c. €100m per year to push major brands
• Develop a global online sales platform
• Leverage key existing capabilities of Essilor
(1) On average over two years
(2) Contribution from operations (operating profit before compensation costs of share-based payments, restructuring costs, other income &
expense and goodwill impairment) as a percentage of revenue
(3) Before Coastal.com and new strategic acquisitions
32
Strategy & Innovation
Paul du Saillant
Innovation at the heart of Essilor’s strategy since 160 years
INNOVATE
DEVELOP
GROW
STIMULATE
Products and
Services
Top &
Mid-tier
markets
Acquisitions &
Partnerships
Demand
for Vision
Improvement
Operational and management efficiency
Corporate social responsibility
34
Innovation, written into Essilor’s DNA
 Cooperative roots
 Culture of entrepreneurship
 Pioneering through
breakthrough innovations in the
ophthalmic optics industry
35
Innovation embraces all dimensions of the company
Shareholder model
Growth through acquisitions
and partnerships
25%
+ 200
of our employees are
shareholders
partners have joined the
group since 2005
36
New business models
+ 100 000
wearers of glasses
in 2013
Long-term Growth Drivers in Optics
Demography
Worlwide wearers
Urban population
In billion of people
In billion of people
2020
2020
5.0
2.2
2013
2013
1.8
Source Essilor estimates, United Nations
3.7
37
Long-term Growth Drivers in Optics
Visual Impairments
Myopia
Presbyopia
In billion of people
In billion of people
2020
2020
2.3
2.0
2013
2013
1.6
Source Essilor estimates, United Nations
2.0
38
Long-term Growth Drivers in Optics
Visual Health
Cataracts
AMD
In million of people
In million of people
2020
2020
120
320
2013
2013
250
100
Source: Worldbank, United Nations, CIA, World Population Prospects, Epidemiological and Marketing studies, Essilor analysis
N.B.: Simplified Extrapolation Model of Cataract & AMD prevalence [Essilor Int., DMS, EL, Jan. 2013]
39
Innovation, a key driver for value creation
Products
40%
of turnover is generated by
products less than 4 years old
5 000
+ 100
Patents
New patents in 2013
+ €150 M
Solutions
28
Services
plants
+ 450
prescriptions laboratories
400 000
40
invested in innovation
ECPs
An innovation strategy based on 3 key points…
CORRECTION
PROTECTION
PREVENTION
Deflect
harmful
Blue-Violet
Light
UV
protection
Varilux S: 5 to 40 % of market
penetration depending on
geographic areas
100 % of Crizal lenses in the
world have UV protection
rating with E-SPF
41
Crizal Prevencia : 12 % Crizal
sales in France in the 1st
quarter
… and affecting all market segments
PREMIUM
• Varilux S, Varilux E
• Crizal Prevencia
• Optifog Smart Textile
• Nikon Seecoat Blue
• Transitions Signature
• Transitions Graphite Green
READERS / SUNGLASSES
MID-RANGE
• Intuitiv
• I Relief
• M’Eye Fit tablet
42
• Xperio Gradient Polarized
• Polaroid Rx
A global organization supported by expertise of the best
scientific, industrial and academic communities
43
Yesterday… today… tomorrow… Essilor is a pioneer
CUSTOMER
EXPERIENCE
MYOPIA
AUGMENTED
REALITY
GLASSES
HEALTH
2020
Selective
filtration
Personalization
Digital
Surfacing
Photochromic lens
Progressive
lens
1960
Anti-reflective
lens
Organic
1990
lens
2000
45
SUN
2010
Sun strategy
Eric Thoreux
Strong category growth ahead
Inherent drivers
Under-penetrated category
% of world population owning
sunglasses
FASHION
c85%
c25%
KIDS
Today
Today
Potential
Potential
% of SunRx amongst eyeglass wearers
EMERGING
MIDDLE
CLASSES
c50%
AGING
c10%
Today
2011
Source: Estin & Co estimates and analysis; Essilor International
46
Potential
2012
Most Sunglasses Today do not Offer the Right Quality
Street Sales
Specialty Retail
Mass Channels
15 $
150 $
 Sunglasses sold on the street can be harmful
 Limited differentiation in vision quality whatever the price
 Technologies exist to differentiate vision performance
47
300 $
Grow on the three segments
Retail
sell-out price
PERFORMANCE
LUXURY FASHION
 RSP > $100
 26m units
 RSP > $100
 12m units
ENTRY/ MID-TIER
 RSP $5 - $100
 510m units
“INFORMAL TRADE”
Functional use
48
Essilor with the right capabilities
Core Essilor
 R&D
 Rx Labs
 Mass manufacturing
(clear prescription)
Frame scale /
Logistics
Consummer access
 125 million eyewear purchased
 Chinese partners
 Multi-channel presence
 Sun actors parnerships
Brand portfolio
Sun Lens know-how
Rx Sun know-how
Source: Essilor International
49
Costa, fastest growing performance brand in the USA
50
Bolon, first Chinese brand in mid-range segment
51
Ambition: a c1.1b€ total Sun business by 2018
Revenue in € billions
2018
1.1
2013
0.5
10%*
* As a percentage of total Group revenue
52
Hubert Sagnières
Poor Vision is the World’s
most widespread Handicap
Number of people requiring vision correction
in the world
2020
5.0
billion
2013
4.3
billion
Source: Essilor estimate
55
In 2013, 4.3 billions of people need visual correction
1.8 billion
2.5 billion
correct their vision
have a bad vision
56
A solid business model
Innovation
More than 100 patents filled
200 new products
Human
resources
55,000 people
in 62 countries
Acquisitions
28 acquisitions in 2013
Growth
Geographic
development
3 new countries:
Chili, Colombia and Nepal
Profitability
~ 10 % per year
57
18%-19 %
A responsible company
BOP Innovation Lab
58
Essilor’s mission
Improve life by
improving sight
59
Governance
Hubert Sagnières
Essilor’s Governance
Executive
Committee
Five Board
Committees
Employee
shareholders
Board of
Directors
Shareholders
61
Members of the Board of Directors at December 31, 2013
 Philippe ALFROID
 Xavier FONTANET
 Hubert SAGNIERES
Independent Directors
Valoptec
 Benoît BAZIN
 Antoine BERNARD
DE SAINT-AFFRIQUE
 Yves CHEVILLOTTE
 Mireille FAUGERE*
 Louise FRECHETTE
 Bernard HOURS
 Maurice MARCHAND-TONEL
 Olivier PECOUX
 Michel ROSE
 Maureen CAVANAGH
 Yi HE
 Aïcha MOKDAHI
Scheduled Board Meetings
Attendance rate in 2013: 95.8
%
* Resignation on March 27, 2014
63
Designation of an employee representative with vote on
the Board of Directors
 14 June 2013 law on employment protection: promoting inclusion of
employees’ perspective on company strategy.
 Appointed by Essilor International’s Corporate Central Committee
for 3 years.
 Eligibility conditions: French employee of the Group
At least 2 years’ service
Not holding any other office
 Timetable:
07 May 2014
: AG to modify statutes
Before end of July : Call for candidates
28 Octobre 2014 : Appointment of Director representing employees
63
Board of directors – appointment renewal
 Renewal of appointment to the Board for 3 years:
M. Philippe ALFROID


Essilor Board Director since May 1996
Former Chief Operating Officer of Essilor until his retirement
in June 2009
 Renewal of appointment to the Board for 2 years*:
* subject to the adoption of resolution 24
M. Maurice MARCHAND-TONEL


Essilor Board Director since November 2006
Senior Advisor at BearingPoint France SAS, Advisor
Director at Investcorp Bank B.S.C (USA)
M. Michel ROSE


Essilor Board Director since May 2005
Previously, Deputy Managing Director (non executive)
of the Cement Division of Lafarge until May 2008
64
Board of directors – appointment renewal
 Renewal of appointment to the Board for 3 years:
M. Yi HE


Essilor Board Director since January 2010,
representing employee shareholders
Président of Essilor (China) Holding Company (Chine)
Ms Aïcha MOKDAHI


Essilor Board Director since January 2007,
representing employee shareholders
Director Essilor Vision Foundation, Europe & Amera
M. Hubert SAGNIERES


Essilor Board Director since May 2008
Chairman and Chief Executive Officer of Essilor since
January 2012, following position of Managing Director
(2010-2012)
65
Essilor’s Governance
Executive
Committee
Five Board
Committees
Employee
shareholders
Board of
Directors
Shareholders
66
Audit and Risks Committee
 Chairman of the committee: Yves Chevillotte
 Members: Philippe Alfroid, Benoît Bazin, Antoine Bernard
de Saint-Affrique, Aïcha Mokdahi
 Attendance rate: 95 %
 Monitors the questions related to the elaboration and to the control
of accounting and financial information
67
Appointments Committee
 Chairman of the Committee: Xavier Fontanet
 Members: Yves Chevillotte, Maurice Marchand-Tonel, Michel Rose,
 Associated to the committee’s work : Aïcha Mokdahi, Hubert
Sagnières
 Attendance rate: 100 %
 Reports on the functioning of the Board and prepares its evolution
68
Remunerations and Corporate Officers Committee
 Chairman of the Committee: Michel Rose
 Members: Bernard Hours, Maurice Marchand-Tonel, Mireille Faugère*
 Attendance rate: 100 %
 Accompanies the evolutions of governance and assists those
concerned
 Makes recommendations to the Board which in turn decides on the
remuneration of company Directors in line with the AFEP-MEDEF code
 Reviews the allocation of performance shares for all employees
* Resignation on March 27, 2014
69
Rewarding annual and long-term performance
2013 compensation structure
75% performance-linked
Salary
25%
Annual
bonus *
25%
Long-term incentive**
50%
* Target
** Allocation of performance shares valued according to IFRS norms
70
2013 bonus structure
Earnings per share
40%
Organic growth
30%
Growth from bolt-on acquisitions
10%
Personal objectives
20%
71
Variable target =
100% of salary
Long-term incentive: sustainable value creation and
entrepreneurial risk-taking
Employees
Vesting conditions
Lock-up period
Growth in the share price
Employees in France: shares freely
transferable at the end of a period of 6 or
8 years
Employees outside France: half of the
shares freely transferable at the end of a
period of 4 or 6 years
Additional conditions
Executive Committee
Chairman and Chief
Executive Officer
+ Achievement of Group
annual performance targets
+ Achievement of annual
performance targets
72
+ At least one-third of shares - or the
equivalent of two years' compensation to be kept for as long as he remains
Chairman and CEO
Principles : meritocracy, long-term commitment and loyalty
Fidelity supplementary defined pension plan
 Beneficiaries: senior executives
 Minimum 10 years’ service
 Present in the company at retirement
 Reference salary: 3 last years of salary and bonus
 Maximum: 25% of reference salary
73
Summary of remuneration of Mr Hubert Sagnières
for financial year 2013
2012
2013
Variation
-
-
-
Salary
€ 800k
€ 800k
0.0%
Target bonus
€ 800k
€ 800k
0.0%
% achievement
123%
106%
-17 pts
Cash compensation
€ 1,784k
€ 1,648k
-7.6%
Performance shares
45,000
45,000
0.0%
Directors’ Fees
74
Deferred compensation
1.
Fidelity supplementary defined benefit pension plan
2.
No compensation for loss of office. Termination pay under the
employment contract suspended.
75
Strategy Committee
 Chairman of the Committee: Hubert Sagnières
 All Board Members
 Attendance rate: 98.7 %
 Meeting agenda prepared by a steering committee
76
Corporate Social Responsibility Committee
(new committee created in 2013)
 Chairman of the Committee: Louise Fréchette
 Members: Bernard Hours, Aïcha Mokdahi, Hubert Sagnières
 Attendance rate: 100 %
 Makes recommendations to ensure the Group responds better
to the economic and social challenges linked to its mission :
improving lives by improving sight
*voix consultative
77
Essilor’s Governance
Executive
Committee
Five Board
Committees
Employee
shareholders
Board of
Directors
Shareholders
78
An expert Executive Committee
engaged in the service of the strategy and mission
Improving the sight
of 4.3 billion people
in the world
Members of the Essilor Executive Committee
79
Essilor’s Governance
Executive
Committee
Five Board
Committees
Employee
shareholders
Board of
Directors
Shareholders
80
Employee shareholding: key to our culture and values
North America
2,839
France
7,091
Europe
2,654
Africa/Australia/
Middle-East/Asia
2,203
Latin America
706
Over 15,000 internal shareholders of whom
7,500 members of Valoptec Association
81
Essilor’s Governance
Executive
Committee
Five Board
Committees
Employee
shareholders
Board of
Directors
Shareholders
82
Shareholding structure increasingly international
% of capital at the end of the year*
48.1%
41.5%
43.7%
39.5%
8.6%
12.3%
1.9%
Canada,
United States of America,
United Kingdom
France
Europe
(excluding France
& United Kingdom)
2008
*
excluding employed shareholders
2013
83
4.5%
Rest of the world
Report by the Auditors
Christine BOUVRY
84
QUESTIONS / ANSWERS
85
Combined Ordinary And
Extraordinary General Meeting
Paris, May 7, 2014
Palais des Congrès
86