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2018-11-09 08:00 CET
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Silmäasema Oyj's Interim Report 1 January - 30 September 2018

Silmäasema Oyj's Interim Report 1 January - 30 September 2018

Silmäasema Oyj                           
Stock Exchange Release                                         
9 November 2018 at 9:00 EET

Like-for-like net sales declined and burdened profitability

July-September 2018 in brief:

  • Net sales increased by 1.9% compared to July-September 2017, amounting to EUR 26.9 million (26.4).
  • Like-for-like net sales decreased by 3.2%.
  • The adjusted EBITDA decreased by 3.8% and was EUR 2.1 million (2.2), or 8.0% of net sales (8.5%).
  • The adjusted operating result decreased by 19.7% to EUR 0.6 million (0.8).

January-September 2018 in brief:

  • Net sales increased by 3.5% compared to January-September 2017, amounting to EUR 90.5 million (87.5).
  • Like-for-like net sales decreased by 2.1%.
  • The adjusted EBITDA decreased by 8.3% and was EUR 8.2 million (9.0), or 9.1% of net sales (10.3%).
  • The adjusted operating result decreased by 24.1% to EUR 3.9 million (5.1).
  • Cash flow from business operations amounted to EUR 6.2 million (2.4).
  • The net debt to adjusted EBITDA ratio on 30 September 2018 was 3.1 (2.6).

The figures in parenthesis represent comparable data from 2017, unless otherwise stated.

Published on 12 April 2018, Silmäasema's outlook for 2018 remains unchanged: Silmäasema's net sales are estimated to grow compared to the previous year. Silmäasema's adjusted EBITDA is estimated to be 9-13% of net sales.

Key figures

EUR thousand, unless otherwise stated 7-9/2018 7-9/2017 Change % 1-9/2018 1-9/2017 Change % 1-12/2017
Net sales 26,892 26,385 1.9% 90,520 87,472 3.5% 118,322
Like-for-like net sales growth, % -3.2% 4.2%   -2.1% 4.6%   3.5%
EBITDA 3,039 1,889 60.9% 8,312 4,574 81.7% 6,894
Adjusted EBITDA* 2,147 2,232 -3.8 % 8,230 8,977 -8.3 % 11,760
- adjusted EBITDA, % 8.0 % 8.5 %   9.1 % 10.3 %   9.9%
Operating result 1,520 519 192.6% 3,914 676 478.7% 1,589
Adjusted operating result* 639 796 -19.7 % 3,863 5,087 -24.1 % 6,472
- adjusted operating result, % 2.4 % 3.0 %   4.3 % 5.8 %   5.5%
Basic earnings per share, EUR 0.06 0.02   0.14 -0.13   -0.05
Net debt / adjusted EBITDA       3.1 2.6   2.9
Investments - operational       5,933 4,329 37.1% 6,058
Investments - acquisitions       1,683 6,429 -73.8% 6,699
Investments - total       7,616 10,758 -29.2% 12,757
Number of locations, Silmäasema chain       182 169 7.7%  172

* 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 adjusted EBITDA best illustrates the profitability development of its business operations.

Interim CEO, CFO Anu Kankkunen:

Silmäasema's net sales grew during the third quarter, but the growth was slower than before and was not on the level anticipated. Our total net sales increased due to the opening of new stores and the eye clinic in Oulu, but our like-for-like net sales decreased in both reporting segments. We cannot be satisfied with this, even though fluctuation in the sales level is part of the nature of the sector. The last quarter has started with strong sales, so far the growth in October-November has been more than 10 percent.

The slow performance of net sales was also adversely affecting profitability in the review period. The Group's adjusted EBITDA was behind last year both in Q3 and in the first nine months of 2018. With the expansion of our network, our expenses have increased as planned, but our net sales have not grown at a sufficient rate in relation to the expenses, even though our new stores continue to develop in the right direction. Lower like-for-like net sales are also weakening profitability. The second quarter of 2017 was exceptionally strong, particularly in terms of profitability, which is part of the reason for the development of the figures in January-September 2018 in relation to the comparison period. 

We opened two new optical retail stores in Finland in August-September, but as we announced earlier, we are now focusing more on improving the net sales and profitability of our existing network than expanding the network. During the review period we started looking into measures that will enable us to accelerate productiveness and profitability. The work is still in progress and the impact of any measures are only likely to be visible in our results starting from next year. We have also continued planning the information system renewals related to Silmäasema's development programme.

In September the Board of Adjustment partly annulled the Tax Administration's decision regarding the value added taxation of Silmäasema Optiikka Oy. Regarding the rejected appeals for adjustment, Silmäasema has appealed against the decision to Administrative Court. Due to the Board of Adjustment's decision, the tax returns entered in the third quarter income statement have a clearly positive impact on Silmäasema's result and cash flow for the 2018 financial year. However, the decision will not change the company's outlook as Silmäasema has eliminated the impact of the change in value added tax deduction practice when reporting the adjusted EBITDA and adjusted operating result, and it will also eliminate the impact of the returned value added tax items.    

Silmäasema's outlook for 2018 remains unchanged. We estimate that our net sales will grow compared to the previous year and that our adjusted EBITDA will be 9-13% of net sales. However, our adjusted EBITDA for the full year will be closer to the lower end of this range.  

Outlook for 2018 (unchanged)

Outlook provided on 12 April 2018

Silmäasema's net sales are estimated to grow compared to the previous year. In 2017, the company's net sales were EUR 118.3 million.

Silmäasema's adjusted EBITDA is estimated to be 9-13% of net sales.

Basis for the outlook

The competitive situation in optical retail continues to be tough. However, Silmäasema's net sales are expected to increase, mainly due to new optical retail stores to be opened or acquired in 2018, as well as sales growth with regard to stores opened in 2016 and 2017. Markedly fewer new stores will be opened or acquired in 2018 than over the past two years. In addition, the good general economic situation and the favourable development of private consumption are expected to support demand in optical retail.

The ageing population and Finns' increased investment in health and well-being are factors that are expected to increase the demand for optical retail and eye healthcare services. This trend is expected to support the development of the net sales of Silmäasema's Eye Clinics segment in 2018. Its net sales are also expected to increase because of sales growth as a result of the new eye clinic in Oulu, which was opened in February 2018.

Due to the high sales margin, the level of adjusted EBITDA is highly dependent on the performance of net sales. Over the short term, fluctuation in the net sales of the network of well-established stores is the only significant factor affecting the EBITDA level. Over the longer term, the increase in productivity resulting from changes in operating models will change this level but will not eliminate the fluctuation.

Expenses are also expected to increase as a result of the expansion of business operations and growth in net sales. The most significant expenses are related to salaries, rents and marketing. These expenses can be predicted relatively accurately for the full year. The development programme initiated in 2018 will generate costs while the programme is ongoing, but the timing of these expenses is difficult to predict at this point. Procurements related to the programme are likely to be booked as capital expenditure.

Near-term business risks and uncertainties

Silmäasema's strong growth strategy increases its business risks. Opening new stores and finding the most suitable business locations, as well as company acquisitions, require careful preparation and strong expertise in integration. The growth strategy will continue to require skilled personnel and investment in organisational development and key persons. Learning new things and managing profitable growth require special attention to motivating and target-oriented leadership, and to the development and controlled implementation of new operating models. In 2018, the company launched a significant development programme that involves changes to operating models and the renewal of information systems. The development programme involves uncertainty in terms of the amount and timing of costs and investments. The project will tie up resources, which may have temporary effects on the company's business operations.

Silmäasema has strongly expanded its network of stores in recent years. In the early stages, the profitability of new stores is burdened by investments in the start-up of operations and the achievement of a strong market position. Previously, new stores have reached their normal level of profitability in one or two years, but this involves uncertainty. For example, it will take some of the stores that were opened in 2016 over 2 years to reach their normal level of profitability.

The profitability level of optical retail may vary between quarters within the year and in relation to the comparison period, due to variations in the structure of sales. The factors affecting the structure of sales, such as the effectiveness of Silmäasema's and its competitors' sales promotion measures, may be difficult to predict.

The competition in healthcare has moved closer to regular consumer markets. Silmäasema must be able to adapt its business models in a more demand- and consumer-oriented direction. Silmäasema monitors the changes in the market and continuously observes its competition, among other measures. Highly competent healthcare professionals lay the foundation for the operations of Silmäasema's Eye Clinics segment. Its growth and success depend on the company's ability to recruit and keep the best experts in the field.

Silmäasema participates in competitive bidding processes organised by public hospital districts looking to partner with private service providers in the treatment of eye diseases. The competitive bidding processes and their results always involve uncertainty. However, the results of individual bidding processes are not expected to have a significant effect on the Group as a whole.

Silmäasema uses various information systems in its business operations. The critical role of the systems is analysed, and risks are minimised as part of risk management. In addition, Silmäasema is currently carrying out and planning several significant information system projects. The risks involved in information system projects are minimised by meticulous project management, among other measures. During the development programme launched in 2018 most of the company's information systems will be renewed over the next two years. The renewals are likely to concern at least cash register and reporting systems, as well as category management and digital services for customers.

Healthcare involves patient liabilities, which are mainly borne by doctors. The company has prepared for these risks with appropriate liability insurance policies. The company protects itself against other damage risks with statutory insurance policies and with optional insurance policies related to property, disruption of business and certain responsibilities, among other aspects.

Structural changes in the public sector and changes in healthcare regulation may impact Silmäasema's business operations. The total impact of the planned health and social services reform and other changes in the organisation of social and healthcare services in Finland are difficult to predict. Policy alignments may affect Silmäasema's profitability and growth prospects. However, more than 90% of Silmäasema's net sales come from operations such as the sales of spectacles, contact lenses and refractive surgeries, which are already provided through free competition. These activities are not directly dependent on the health and social services reform that is currently being planned. The reform is estimated to impact this portion of net sales only slightly.

Audiocast and conference call for investment analysts and press

A briefing for investment analysts and the press will be arranged on Friday 9 November 2018 at 10:30 a.m. EET through a live audiocast combined with a conference call. The briefing will be hosted by Interim CEO, CFO Anu Kankkunen. Link to the audiocast is available at:

Conference call numbers:

Finland   +358 (0) 981 710 495
UK   +44 (0) 203 194 0552
USA   +1 855 716 1597
Sweden   +46 (0) 856 642 702

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

Additional information

Anu Kankkunen, Interim CEO, CFO, tel. +358 50 669 69

Tuukka Hirvonen, Head of Communications and Investor Relations, tel. +358 50 416 7700


Anu Kankkunen

Interim CEO, CFO

Tuukka Hirvonen

Head of Communications and Investor Relations

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 over 150 stores and 14 eye clinics in Finland as well as ten stores in Estonia. The Silmäasema chain employs close to 1,000 eye healthcare professionals. Silmäasema's Group net sales were EUR 118.3 million in 2017 and adjusted EBITDA was EUR 11.8 million.