Chapters
Annual Report 2019

4.4 Segment performance

G4

The G4 segment includes our four largest business units: (i) The Netherlands and Belgium; (ii) France, Luxembourg and Monaco; (iii) Germany and Austria; and (iv) the U.K. and Ireland, including franchises in several Middle Eastern countries.

The G4 business units manage retail brands with owned and franchise stores across these countries. Within the segment, we have market leading positions in Austria, Belgium and The Netherlands, and number two or three positions in France, Germany and the U.K.

At the end of 2019, the G4 segment operated a network of 3,428 stores, an increase from 3,387 stores in 2018. Key brands in the G4 segment include Apollo Optik in Germany with 873 stores, Pearle in Austria, Belgium and The Netherlands with 697 stores, Générale d'Optique in France with 627 stores and Vision Express in the U.K., Ireland and Middle East with 615 stores.

Revenue

In the G4 segment, revenue increased by 6.0% at constant exchange rates to €2,265 million in FY19 (2018: €2,131 million) with organic growth was 4.2%. Acquisitions, which contributed 1.8% to revenue growth, are mainly related to acquiring franchise stores across Germany and The Netherlands during the year as well as Charlie Temple.

The total number of stores in the G4 segment increased by 41 to 3,428 (FY18: 3,387), which was mainly driven by store openings and acquisitions across the region.

Comparable growth for the segment accelerated to 3.7% in 2019, from 2.4% in 2018. In the Benelux, we saw a particularly strong business performance in The Netherlands driven by successful commercial campaigns, following a difficult year of management transition. In France and Germany our businesses delivered solid comparable growth for the year in line with overall segment growth.

Our U.K. business saw modest comparable growth as it has continued to be impacted by a weaker retail environment. This was compensated by growth in online sales as well as an improving performance of the Vision Express business in Tesco stores.

Adjusted EBITDA

Adjusted EBITDA in the G4 segment was €616 million in 2019, compared to €411 million in 2018, largely due to the impact of IFRS 16.

Excluding the effect of IFRS 16, adjusted EBITDA in the G4 segment grew by 2.2% at constant exchange rates to €421 million as the full recovery of the Benelux segment during the year was partially reduced by an EBITDA decline in the U.K. related to operational and macroeconomic headwinds as well as higher investments in e-commerce activities.

The adjusted EBITDA margin decreased by 73 bps to 18.6% in 2019 (FY18: 19.3%) mainly due to investments in online platforms and omnichannel solutions as well as a weaker operational performance in the U.K.

Other Europe

The Other Europe segment includes our business units that operate in Northern, Eastern and Southern Europe.

These business units manage single or multiple optical retail brands in one or several countries. The brands are mostly comprised of own stores and, to a lesser extent, franchise stores.

In many markets, GrandVision brands have market leading positions such as in the Czech Republic, Estonia, Finland, Hungary, Italy, Poland and Portugal. Key retail brands include GrandVision with 292 stores across Italy, MultiOpticas in Portugal with 217 stores, Vision Express in Poland, Hungary and Bulgaria with 281 stores, as well as Synoptik in Sweden and Denmark with 246 stores.

At the end of 2019, there were 2,134 stores in the Other Europe segment, an increase from 1,912 stores in 2018, due to acquisitions and openings across the region.

The optical retail markets in the Other Europe segment are characterized by higher maturity profiles in Northern Europe and parts of Southern Europe, and a lower level of maturity with faster annual growth rates across in Eastern Europe.

In 2019, we continued to capture growth opportunities in this segment through the acquisitions of Óptica2000 in Spain and McOptic in Switzerland, as well as expanding our existing store base through acquisitions.

Revenue

In the Other Europe segment, revenue increased by 12.3% at constant exchange rates to €1,268 million in FY19 (FY18: €1,130 million) with organic and comparable growth of 4.0% and 2.8%, respectively. Acquisitions, primarily Óptica2000 in Spain and McOptic in Switzerland, contributed 8.3% to the revenue growth.

Comparable growth was particularly strong in Eastern Europe, especially in Hungary and Poland, while our more mature markets in Northern and Southern Europe delivered low single digit growth.

Adjusted EBITDA

Adjusted EBITDA in Other Europe increased from €176 million in 2018 to €315 million in 2019, largely due to the impact of IFRS 16.

Excluding the effect of IFRS 16, adjusted EBITDA in the segment increased by 11.2% at constant exchange rates to €195 million in FY19 (FY18: €176 million), driven by organic growth of 6.1% and a positive contribution from acquisitions of 5.1%.

The adjusted EBITDA margin decreased by 18 bps to 15.4%, as strong EBITDA growth and margin enhancement in Italy was reduced by the focus of the business integration in Switzerland and a weaker operational performance in Northern Europe.

Americas & Asia

The Americas & Asia segment includes businesses in Latin America, China, Russia, Turkey and the U.S.

In Latin America, we operate leading optical retail brands in Argentina, Chile, Colombia, Mexico and Uruguay. Most regions in the Americas & Asia segment have the lowest levels of maturity in the GrandVision group.

These optical retail markets have been growing faster on average than the more developed markets in the G4 and Other Europe segments. GrandVision is a market leader in Latin America with number one positions in Argentina, Chile, Colombia and Uruguay.

During 2019, we increased our store network by 48 to 1,844 as openings across the region were partially offset by closings to enhance the profitability of the segment, particularly in Latin America. In Turkey, we opened 43 stores in 2019. The Mexican market expanded its position as GrandVision's largest market within the segment with a total of 690 stores at the end of 2019.

Revenue

The Americas & Asia segment delivered revenue growth of 12.1% at constant exchange rates to €504 million in FY19 (FY18: €459 million). Comparable growth and organic growth reached 8.8% and 12.1%, respectively, with particularly strong comparable growth in Colombia, Russia and Turkey.

Adjusted EBITDA

Adjusted EBITDA in the Americas & Asia segment increased from €20 million in 2018 to €100 million in 2019. This was largely due to the impact of IFRS 16 as well as a strong organic EBITDA growth during 2019.

Excluding the effect of IFRS 16, adjusted EBITDA increased by 57.2% at constant exchange rates to €29 million in FY19. During the year, the segment achieved strong underlying organic EBITDA growth driven by a strong operational performance in several Latin American markets, Russia and Turkey, which was partially reduced by ongoing operational challenges in the U.S.

The adjusted EBITDA margin increased by 144 bps to 5.8% compared to 4.3% in FY18.