Paul du Saillant - COO Laurent Vacherot - President, COO & Director Géraldine Picaud - CFO

Michael Jungling - Morgan Stanley Cedric Lecasble - Raymond James Euro Equities Delphine Le Louet - Societe Generale Cross Asset Research David Adlington - JPMorgan Chase & Co. Francesca Di Pasquantonio - Deutsche Bank Aegean Antoine Belge - HSBC Julien Dormois - Exane BNP Paribas Veronika Dubajova - Goldman Sachs

So good morning, everyone. I'm happy to welcome you in our H1 conference call together with Paul du Saillant, Chief Operating Officer; and Géraldine Picaud, Chief Financial Officer; and obviously the full Investor Relations team.

So as you have seen in H1, we delivered another semester of growth. Revenue has been up 9.1%.

Contribution from operations up 6.6%. And we delivered a strong cash flow generation.

Now we have to recognize that our performance has been impacted by a few and temporary situation. Some of them are not in our control, like the economic situation in Brazil, other are addressed as we speak and over the coming quarters, like the Bolon business in China.

Also all of this is happening in the context where the worldwide demand of better vision is growing and while the combination with Luxottica will give us new valuable capabilities. So to analyze our performance and specifically the organic growth revenue of 2.5%, you have to keep in mind 3 things affecting the growth.

First, a more challenging environment following the announcement of our proposed combination with Luxottica, this is something we knew could happen. We took it into account in the net synergy from the combination we communicated to you in January.

As you know, the eyeglass market is competitive. Customers have choices.

And we're likely to continue to face this pre-deal effect for the next 2 quarters. Of course, our sales and marketing are very active, very close to customers, leveraging flow of new products until they will be in an even better position once the announced -- once the proposed combination is finalized and we will start to develop better offer for the industry.

Second, challenging economic condition in Brazil, where the drop in revenue cost us about 0.5 percent point of organic growth in H1 at the group level. Third, an operational issue at our partner, Xiamen Yarui Optical in China which owns Bolon and Molsion brands.

In fact, the distribution landscape in China is trending quite fast for the sun business. Direct-to-consumer distribution is accelerating while wholesaler and ECP and eyecare professional are slowing down.

This shift means that Xiamen Yarui Optical is repositioning its activities through key accounts online and on stores and obviously have to manage excess inventory in wholesale channel. In this context, we're building a strong sun asset in China.

I'll remind you the very high awareness of the Bolon brands, growing fast online and through its own store, a growing position in the fast-growing mono brand retail channel with the addition of MJS. Now I remind you our product innovation portfolio is robust and going to the market as we talked.

And demand for better vision is accelerating with the global rise of myopia and presbyopia. Our results, therefore, continue to be very resilient.

And let me give you a few examples, a good momentum in developed markets, especially thanks to innovation in Europe; and two, the initiative with the doctor alliance in the U.S., where we're growing nicely against the market which remained flat in H1; a solid performance of online business, Instrument business and Equipment business; a robust, fast-growing in-market -- a robust growth in fast-growing markets outside Brazil as good season in the sun in the U.S. in Q2; and finally, a strong contribution from acquisitions.

As you know, acquisition continued to be an integral part of our strategy to develop market, improve our position and create future value. Now in the last part of this introduction, a few words about the Essilor, Luxottica combination.

As you have seen, we have made tangible progress since the 16th of January. We completed several conditions to the deal.

The employee representative for this fully supported the combination. We got the AMF waiver and we got a large approval at the Shareholder Meeting in May.

Antitrust filing is underway and we gave a full update on this topic in a separate press release earlier this week. So we won't say more on this topic at this stage.

I would now like to hand over to Géraldine, who will take you through the numbers of the first semester.

Thank you, Laurent and good morning to everyone. I will walk you through our H1 results which reflect our solid performance.

We're in line with our constant currency guidance for the full year. Total revenue for the first half amounts to €3.9 billion, up 9.1% compared to the first half of last year.

At constant currency exchange rates, our revenue growth is 6.9% which as I mentioned is in line with our full year guidance which was between 6% and 8%. Both of our growth engines organic and acquisitions, have contributed to this performance.

On the one hand, our organic sales grew by 2.5%. And on the other hand, the companies we have acquired brought 4.4% additional growth.

Changes in currency rates impacted positively our revenue growth by 2.2%. And this was mainly driven by a stronger average U.S.

dollar versus euro in H1 2017 compared to the same period last year. Based on the exchange rates as at the end of June, this will not continue in H2 and the impact on the full year will be close to flat, actually.

Now sales of Lenses & Optical Instruments grew by 5.8%, including acquisitions and by 2.7% organically, slightly above H2 2016. We believe this is good performance, considering the deterioration in the Brazilian market and the challenging market environment more broadly.

Sunglasses & Readers reported very strong growth of nearly 16%, driven in part by the acquisition in late 2016 of Photosynthesis Group which operates under the banners MJS and Aojo in China. FGX resumed growth in the second quarter.

Performance at Yarui Bolon was challenged by the wholesalers' inventory level which was higher than expected, resulting in like-for-like revenue performance of minus 1.5%. We can assure you we're proactively addressing this situation.

Finally, Equipment had a very robust first half, driven by the strong appetite of the industry players for state-of-the-art technology. All businesses combined organic revenues were up 4.5% in fast-growing markets.

These markets account for close to 1/4 of our H1 sales. However, excluding headwinds, such as Yarui Bolon and Brazil, the organic growth would have been high single digits.

Let's now take a closer look at the Lenses & Optical Instruments division and the breakdown of the 2.7% like-for-like growth. In North America, the organic growth accelerated in the second quarter to achieve 2.7% in the first half.

We believe that our actions, such as the rollout of our initiatives with the members of our doctors alliances, helped us outperform the market. In Europe, after a difficult the start of the year, the situation has been progressively improving and the market has embraced Varilux X series, our new and most advanced progressive lens.

In Asia Pac, Middle East, Africa, most countries reported significant growth, notably China, where the trend clearly improved compared to last year. However, the overall performance is hampered by specific situations in Saudi Arabia and India.

In Latin America, while Spanish-speaking countries keep growing at a robust pace, in particularly in Mexico, the situation in Brazil deteriorated in the course of the first half. Moving on to the quarterly view.

Overall growth of Essilor's revenue remained remarkably stable in the second quarter compared to the first one, both in like-for-like terms at 2.5% versus 2.4% and in total growth excluding currency effect at 6.9% versus 7%. In our main division, Lenses & Optical Instruments, North America and Europe are trending better.

However, this is offset by the decline in Brazil. In the Sunglasses & Readers division, the good performance of FGX, Costa and Merve were just sort of compensating for the difficult situation we have encountered with Yarui Bolon in China.

Lastly, Equipment had a record quarter in terms of growth. Going forward, this trend could moderate.

M&A remains a growth driver for Essilor and we remain fully committed to our strategy. Since the beginning of 2017, we have acquired 8 new companies, representing around €85 million in full year revenue and entered 2 new countries, Ethiopia, the second-most populated country in Africa with over 100 million inhabitants; and Guatemala with 17 million inhabitants in Central America.

We continue to form partnerships and JVs with the our local optical players to broaden our reach to both the eyecare professionals and consumers. We pursue this market consolidation in all business segments where we're active, lenses, sunwear, online which all are fragmented.

Okay. Now let's move to talk about margins.

For the sake of clarity, please note that all P&Ls in this presentation are excluding the cost directly attributable to the combination with Luxottica. Nearly all of these were booked in other income and expense as you have seen in the management report this morning.

Gross profit and contribution from operations are not materially impacted. Changes in the channel mix, an increasing contribution from our online businesses, both organic and acquisitions.

The decline of Transitions sales to other lens casters made for a gross margin of 58.2%. Our contribution from operations at 18.4% of sales is in line with the guidance we gave you in February.

At €721 million, this is 6.6% growth over the prior year. It was supported by a more favorable cost base during the first half.

Operating expenses, as you can see, were 39.8% of sales versus 40.7% in the comparable period. This is our usual chart breaking down the evolution of the contribution from operations between the organic business and the acquisitions.

As you will remember, we had a pretty strong comparison base in H1 2016 with a relatively high 18.9% margin. In H1 this year, despite ongoing efficiency gains in operations, temporary headwinds, such as the impact of current challenging market conditions plus the further decline of Transitions sales to other lens casters, led to a margin of 18.6%.

Dilution from acquisitions has been limited, thanks to a good performance of Photosynthesis Group in H1. And now the P&L down to the EPS.

Below contribution from operations, the main variance is a net increase of €20 million in other operating expenses as you can see. While we benefited from an asset disposal gain in H1 last year, this year, we incurred the settlement of the Vision Ease litigation and the increase of share-based payment costs, in line with Essilor employee shareholding program.

When netting these factors out, the variance is essentially neutral. The effective tax rate has been lowered through the bilateral agreement on patent-related royalties that we have obtained during H2 2016 between the French and the U.S.

authorities. We expect this 24.5% effective tax rate to remain during the course of the year.

The minority interest materially increased, reflecting the impact of the acquisition and the success of our partnership strategy. And last, our share count increased, among others, under the effect of the scrip dividend paid in 2016.

All these factors lead us to an EPS of €2. Now we turn to cash flow generation.

As you see, we have strong free cash flow generation at €331 million. If we adjust for exceptional litigation at H1 2016 which decreased our base and the settlement of the litigation with Vision Ease in H1 2017, free cash flow is up 13%.

Capital expenditures were well contained while working capital requirements were impacted by the usual seasonal effect. Over H1, we paid the 2016 dividend and expect €276 million for financial investments used to realize our acquisitions and increase our stake in some of our joint ventures.

This leads us to our net debt which stood at €2.2 billion as of June 30, 2017, a modest and manageable leverage ratio of 1.3x EBITDA. Please keep in mind that in H1 2016, we paid a scrip dividend.

And adjusting for that, we would have modestly delevered. We continue to actively manage our debt, leveraging our quality rating and have been successfully able to tap into the eurodollar market lately.

Overall, we're happy to report solid results for H1 2017. And with this, I'm handing over back to Laurent.

Thank you.

A big thank you, Géraldine. So now what can we expect?

What can you expect from Essilor in the next few quarters and specifically the second half of the year? So first, I would like to remind you the importance of our mission of addressing the needs of 7.4 billion people on the planet for better vision and protection.

It's mobilizing our industry and it's really what drives our initiative and action. Second, the massive potential of our industry which is still very young and very fragmented.

And obviously, all of that stuffed with new products. There is a huge need for innovation.

Consumers need better products. And eyecare professionals, they value innovation in that field, so they provide better vision care to their customer and patients.

As I said in February, this year is a very big one for new products. And in fact, it's happening.

And now let me give you an update. We will launch in North America in September, early September and in the rest of the world in 2018, early 2018, a new Crizal lens called Sapphire 360.

It's a new lens that fight light reflection from all direction around you. It's a real breakthrough and a real addition to all what we do for the Crizal brand.

Speaking now about Transitions. The new style colors and the new flash mirror lenses are very well received by eyecare professionals and consumers, especially younger consumers, they love it.

It has been launched in Europe and we'll progressively launch it in the world, starting by Asia in H2. Those lenses are very cool, providing mirror effect which intensify in the sun.

They are really great. And entering this summer, I encourage you to look at those lenses.

Teams are also preparing the launch of a new Transitions lens early 2018. This new lens will allow a larger consumer base to enjoy the benefit of this brand.

More to say in the coming calls. Eyezen, you remember this lens for connected life, now exists in many, many varieties.

In addition in September, we will launch an Eyezen for kids, a lens equipped with the technology that enhances, contrasts and sharpens vision. We continue to develop the Eye Protect System in Europe and in the U.S.

This is a coating offering protection against blue light and harmful UV rays on the clear lens. It will be launched in Asia and Latin America in H2.

Now for sure, the highlight of this first half is the launch of the new Varilux X series. This latest generation of progressive lenses has had a very promising start in Europe.

The product is well received by consumers and by professional customers. It was launched in Q2 in Canada and Europe, where the teams did a great job with 75 roadshows, speaking to 10,000 eyecare professionals in Europe.

The rest of the world will follow in Q3 with 150 communication events planned in the U.S., starting actually now and until back-to-school. All in all, this global launch, we will have -- will have been completed in less than 6 months which is quite a promising and efficiency launch.

Let's continue with the development of our online strategy. In H1, our online sales went up 14% like-for-like with a sequential improvement from Q1 to Q2.

In Europe, the success of Vision Direct model supports growth. Several site migration are underway to boost our efficiency and to create a great brand for consumers that like contact lenses.

In North America, we capitalized and invested in the success of EyeBuyDirect model and clearly is improving quarter-after quarter. In fast-growing markets, we continue to expand our presence in China and India, where the upside potential is huge.

To conclude on the lens division, we expect slightly better like-for-like growth in H2, driven by new products, ECPs and key accounts in the U.S. and Europe and a better momentum in fast-growing markets.

It will be or it may be partly offset by the persistence of the challenging market's reaction to our proposed combination with Luxottica and by the economic headwinds in Brazil that we don't see how it would be much better in H2. A few words on the sun division.

We're gaining market share in Europe, in Turkey, in the U.S., both in the entry segment with Foster Grant and with Costa in the premium segment. At the same time, as I explained earlier, we're addressing the challenge of our business in China by adapting it to the ongoing change in signing in Chinese distribution landscape.

Plus for this division on the midterm, we're confident that the Luxottica expertise in sun will help us to accelerate value creation even further. Now how do we see the second semester?

Taking all of this into account, market condition issue we're fixing and growth initiatives we're driving, we want to give a cautious outlook for the year. We anticipate new revenue growth -- we anticipate now a revenue growth between 6% and 7% in constant currency, including around 3% on a like-for-like basis.

The adjusted contribution from operations is expected to be close to 18.5% of revenue for the year which means we expect our profitability in H2 to be the same order of magnitude that the one we delivered in H1. I'm now happy to open the Q&A with Géraldine and Paul to answer your questions.

I have three questions. Firstly, on the track record, in the past, Essilor has had an amazing track record, best-in-class.

But lately, arguably the operational performance has been a bit more bumpy or lumpy. Is this is a function of a more competitive environment?

Is it Essilor becoming more complex and therefore, it's more difficult to manage? Or is there something else that is causing some issues over the past, let's say, 2 years?

Secondly, on the midterm growth guidance of accelerating organic sales growth. We haven't seen much evidence of that yet.

What are the major obstacles that is stopping you from showing perhaps slightly better execution? And question number 3 is in relation to the competitive disruption.

Can you comment on the trends from Q1 to Q2 of this year in U.S. and in Europe?

And is it coming from independents? Or is it from chains that are causing some problems for you?

So a lot of good questions. So I will try to answer as transparently as I can.

So you're speaking about the track record and asking if we're operating in a more complex environment and if it's becoming more complex for us to manage and so on. I think there is 2 realities.

One is since the combination has been announced, as I said, we're facing a more competitive environment and we can elaborate more a little bit later in your question number 3. Second, as you understand, part of the strategy is to build 2 new activities and to grow and to build more assets in China.

And all of that being quite relatively new for us and we're dedicated to make it happen. And obviously, it's new.

It may be different -- it's different. And the teams are facing a situation that we cope one-by-one with the same direction which is accelerating ultimately the whole company.

I will go to your question number 3. And you asked a question about the customer reaction.

I would say, we're -- where is it, when did it start and so on and so. We have to look at this question with a lot of serenity.

Number one, we always said it will, it may happen. It was said since the beginning.

And knowing our intent and when and so on, it's quite difficult to assess and to assess at the beginning and eventually to assess until now. What we can say as well is we have also already went to that kind of situation, when Essilor has implemented change in the industry, like we did a long, long time ago, when we integrate labs in the U.S., more recently when we acquired 100% of Transitions and more and more recently with our initiative in the online at least in some markets.

What we see what will happen, when it happens is 2 things. First, obviously, competitors, they take advantage of the situation.

That's for sure. And that's their game to play.

Second, professional, some of them, they have, I would say, emotional reaction. They'll say, "What's happening?

Is it good for me? Will it be bad for me?"

And eventually, they slow down their purchase from us or eventually they change part of their sourcing to other providers that are there to serve them and very happy to serve them. What we see as well is with the huge work and exceptional work of our sales force and marketing teams that at moment are very close to the customers, that will have the chance to get new initiatives and new products and new innovation in their hand, progressively they go back to a more normal situation.

How long does it take? 1 quarter, 2 quarters, 3 quarters, nobody knows.

But I can tell you that the teams at the moment, they do an exceptional job with the new product that we have to be closer to the customer, to explain. And at the end of the day, eyecare professionals, what they want is good product, better product to satisfy the consumers, to provide them better vision care.

And guess who is providing those products in the market? This is Essilor.

And it's happening at the moment. Third or fourth, I don't remember, for the future combination, we delivered the synergy, expected synergy.

And it was net synergy of any customer reaction that we could anticipate. So I think it's happening.

Difficult to measure, we -- the [indiscernible] that it's a little bit more in Q2 than in Q1 because sourcing takes time changing sourcing or adjusting sourcing and so on. In the second half, we have now a much fuller, wider range of new products to offer in a global way.

So we expect that work to be close to customers and to introduce those new products will pay. It may continue as well.

That's a little bit the way we look at that situation with a lot of serenity while we're building this fantastic combination with Luxottica which will give voice -- give vision a better voice and a bigger voice.

Can I please follow up on the bumpiness over the last, let's say, sort of 2 years in terms of organic sales growth performance? Is it safe to say from your comments that perhaps moving into new growth areas has proven to be a little bit more of a challenge with respect to execution?

We always mention the situation in the past. That is now fixed clearly when we speak about the online division.

Today, we explained what's happening in China and how, with the new supply system that the team implement, they understand much better what's happening. And we're addressing whatever issue is there.

So it's new, it's fantastic, it's a very high potential. It's key for Essilor to be a leader in China.

And yes, that's what we do.

And on competitive disruption, can you comment on whether the competitive disruption is higher in the U.S. than in Europe?

Is that the highest region of confrontation and [indiscernible] situation for your sales force?

I'm looking at my colleague around the table. No, I don't think we can say so.

It starts with each and every eye care professional now facing a new situation and react to that situation. What we could say, maybe it's more -- it's a little bit more in independent ECP channel than with a bigger retailer.

But no, it's -- the teams are doing a fantastic job to cope with that situation everywhere around the world. And that's what we can say.

And actually, when you look at those big major market delivery, they deliver quite good growth despite that, what you said, the industry disruption or customer reaction. So I think it's very encouraging, in fact.

I have three questions, if I may. The first one, a follow-up on one of the questions on the consequence of the announcement of the merger.

When we look at North America and Europe, where probably, the market shares of those companies are the strongest, in North America, in particular, you had actually a slight acceleration in Q2 versus Q1. So it's a little tough to understand really what -- how it played against you.

And it seems also to be a little new in the wording on the term because the first comments you've had and Luxottica also had the same comments as you, saying that the clients were understanding, pretty aware of the situation and the benefits of the combination. So maybe, there is something -- is that something new?

Is that a typical client? You said it's spread among independents.

Is there something in Q3 which happened that we don't see yet in the figures? Maybe you can -- I'm sorry to insist, but it seems important.

The second question relates to Bolon. There seemed to be, a few quarters ago, an inventory issue.

You were managing selling to take care of the excess inventory. The excess inventory seems to be still there.

What did you eventually miss as far as inventories are concerned and sell instead to -- in China? And the last question is more technical, relates to CapEx.

CapEx was 3.2% of sales or 64%, if we're correct. Should we consider that it's a lot of phasing or should we consider that the CapEx at full year will be lower than 4% of sales?

Thank you, Cedric. So let's start by the last one.

CapEx is -- it's phasing and timing. We continue to improve and invest in what we need to do and there is no specific change in the long-, midterm trend.

Let's go to the first one. So acceleration in North America, acceleration in Europe.

I think it's happening. I think in North America, we start to see really a lift from all the initiatives we're doing with the 9,000 eyecare professionals, independent eyecare professionals which are part of the buying group.

So this is happening and that was expected, as you remember. And I think it's the main reason why we're accelerating strength in North America.

So far, the market didn't help. From the measure we have, it's still flattish.

So that's what we can, eye level, provide you as an analysis. In Europe, honestly, I think it's Varilux X series, that we launched in Q2.

Meeting with customers, so we stop discussing about the combination and we start discussing overall what really matters for them. And all across those 2 regions, also the slight acceleration of online helps those 2 regions to have a better footprint and an increased footprint in the industry, in the market.

And then the second question, the second part of that question was about -- I think the answer is short term versus long term. I think customers, big, mid-size and small, they get that the combination will provide a bigger voice to the vision, will provide a lot of better solutions and better efficiencies that will help them to be better and will help the whole industry to provide better solutions to consumers.

So I think long term, they get it. Now short term, they may be a little bit afraid.

They have solicitation and most of the time, it's a price reduction, a price offering from their -- from our competitors. And some of them, they take advantage of that.

And so it's really short term versus long term. Now Bolon, so what did happen in the last 18 months?

So at the beginning, those companies, they're really going very fast, led by a fantastic entrepreneur. They push, they have -- initially have ideas, they push their ideas and so on.

Then we start to organize a little bit more the operations. And as you know, we built a new plant, we implemented this optimum system starting 1 year ago.

We start to have the full benefit, understanding what's happening at the wholesale level by the end of this year, beginning of this year -- by the end of last year, beginning of this year. Then we have a better understanding of which product is working well and which is less working well with our online sales of Bolon products and with their own store that we increased slightly as well.

Also, we have some measurements in store of what's doing well and not well. So basically, we improved and that's what the Essilor could bring to that fantastic entrepreneur.

It's a little bit more organized way to manage the business while keeping the great value of the entrepreneurship. So bottom line, today, when the sun is better, what's happening?

And what's happening in the market in this part of the market? In this segment of the market in China, is the consumer going more online, consumer going more to attractive stores in malls and less to independent ECPs and that now buys for wholesale.

And now we have to manage the situation which is 2 things. First, we invest and we grow very fast in online for the Bolon and Molsion brand.

Second, we opened some stores, so we have a key understanding of what's happening and we take advantage of that new trend. And third, we manage with our customer wholesaler the situation of inventory quarter-after quarter.

On the top of that, as you remember, we had this acquisition of MJS earlier this year that is right in the part of the segment of the market which is growing very fast which are what we call mono-brand retail stores in malls. So again, we're building and Eric Thoreux and his team, they are doing a fantastic job and coping with the issue and sizing opportunities.

Laurent, Géraldine, can you come back into the consolidation of the Varilux X within the organic European growth? And what is the first feedback from the major markets, meaning France, U.K., where you've been launching?

Second question regards Transitions which continued to bear on the margin, apparently on a lesser extent. But can you detail the impacts exactly?

Are we talking about 10, 20 bps? And are we going to see any further restructuring charges in the coming quarter?

Thirdly, can you provide us a bit more insight regarding the litigation you had in Germany? What was the amount of the fine you received and how this might or might not impact the European antitrust review?

Okay, Delphine, thank you. I will take the Transitions question and Géraldine will take the question on Germany and Paul will take the question on Varilux.

So I'll start with Transitions. So what's happening now in Transitions, with Transitions inside Essilor?

So number one, we still see a decrease in our sales to outside group customers, I mean, meaning, competitors like Zeiss and Hoya. And we will see, it's part of their competitive reaction to many different things, the acquisition of Transitions itself and maybe also the announcement of January 16.

Second, as you know, we, since end of last year, we have implemented -- we're implementing, inside Essilor through our top 15 or 17 countries, a very systematic way to accelerate development of Transitions, the range of Transitions products in our own sale -- inside sales. I should say that it's happening pretty well in some of the countries, especially in Europe and maybe, Paul, you could elaborate a little bit more on it, also in fast-growing markets, have fast quantities, obviously single-product, single-vision Transitions as it's happening.

And we continue our effort, obviously, to implement the systematic way to accelerate growth of Transitions in all the countries. Plus, as you see, it's fed by a lot of new products which are more attractive, more visible for the younger population, new colors, flash to mirror and preparing the launch for 2018 of a product and more dedicated to the younger population.

So that's basically what's happening. So are we fully satisfied?

Probably not. Are we -- are the results encouraging?

Yes, very well. Paul, do you want to speak about Varilux?

Yes, with pleasure, Laurent. Hello, Delphine.

Varilux in Europe is in the context of all the new products that has been going to market in the first half. As you remember and Laurent explained in February that we have the eye protection system that was going to market, that we were going to put into the market the Varilux X in the second quarter and that we had also a whole activation plan around Transitions.

I think the good performance of Europe in the first half and when you relate that performance to the base of the first half '16, I think it has to be kept in mind. So yes, the -- Europe had a good performance and the second quarter is slightly accelerating.

Varilux X, when you launch such a new product, you have to announce it. You have to organize customer events, 75 in Europe, over 10,000 ECPs in the second quarter.

And then consumers start to buy the product. So all the ECPs that I have said has been going to the consumer and then you look for the feedback.

And the great news is that the feedback from the consumer is very encouraging, with kind of a wow effect on this whole new progressive lens that is meant for your connected life, when you are at your job. So it's, I think, very encouraging.

I think it's contributing a little bit to the acceleration of the Q2, but it's really now fully in the market, deployed in Europe. And I think it is a key element of the second half for Europe.

And then, as Laurent said, it's going to be now fully launched into the U.S. from September.

That's a very key element of the activation of the new product and it would be progressively launched in the rest of the geographies also before the end of this year. First results, Delphine, very encouraging, very promising.

So thank you, Paul. So Géraldine, could you take the question about Germany?

Yes. Sure, Laurent.

So that's a very old story, actually and that -- such a story ended up last year, in 2016, with a cash divestment of €64 million, Delphine. So that's why when commenting the free cash flow, we correct the base and correct the base of the €64 million, correct the base of 2017, of the settlement we had in 2017 and then you get the 13% of healthy free cash flow generation.

So that's really nonrecurring litigation.

Thank you, Géraldine.

Yes. A quick follow-up certainly regarding all the discussion you have with the European Commission upfront, submitting the filing.

Is it something that they look at, the German situation or not?

No.

No.

That's completely independent.

No, no, no. It's independent.

Just one question because my question has been asked. I just wonder if you're seeing any impacts from the Luxottica announcement on your discussions around your normal course of business acquisitions.

I wonder if this -- those acquisitions are seeing the announcement as either positive or negative or neutral?

Thanks for your question, David. In the Sun activities, we're positioned in most of the country on a different -- to serve a different segment and different than the one of Luxottica.

So no, we don't see reactions, specifically linked to the combination. And on online, not at all because, the consumer, they're -- the consumer online that are buying online, they are far from understanding, knowing eventually what we -- the fantastic combination we're building.

Apologies if you have already discussed it, but could you please give some granularity regarding the €58 million charge at the other income and expense level? Second question is going back to the synergies and the, let's say, competitive disruptions that you are facing at the moment again, would it be possible to give some granularity as to how your synergy numbers includes this kind of negative implications?

Thank you, Francesca. So I will take the question on the synergy and Géraldine will take the first one on the exceptional expense in the first half.

So on synergy, there is many, many assumptions both on the positive one, accelerating growth, building some efficiency and so on and on the customer reaction one. So really, you should take it as combined synergy numbers and we cannot say more than what we put in the slide in the 16th of January.

So Géraldine?

Yes, Laurent. So the €58 million, actually, all the costs that are directly attributable to the combination with Luxottica, so those mainly consist of all advisers.

It's Antoine Belge of HSBC. Three questions, first of all, on Sun, I think over the last 2 years, it's been a series of things that you saw as one-off and I remember that even at the Annual Results Presentation, you were expecting a pickup quite significant to high single digit in Q2.

Is Sun an area where clearly combining with Luxottica could help, i.e. bringing maybe some of their knowledge about that business that they dominate?

Second question regarding the acquisition, what sort of slowdown have you taken into account in your new guidance for the second half? And also, what could be the outlook for next year, taking into account that maybe you don't want to rush acquisitions until the -- you get the full clearance on the combination?

And finally, could you say a few words on your different online businesses, Q2 versus Q1?

Okay, Antoine. So actually, no.

In Sun, 2 things. Really, the performance you see for the first half is really impacted by the situation in China that I explained 2 or 3 times during this call.

Aside from that, we're with Costa in the U.S. accelerating, with MJS, the Sun business in Q2 accelerating quite mid-single-digit.

So really, it's this situation in China which is that we cope with and we address with the initiative I explained earlier. Next year, an interesting question.

Next year, what we know is that we'll continue to implement new products, we'll continue to make acquisitions where we can. Obviously, the fact that we defer some acquisitions this year will affect a little bit the acquisition growth next year, but it's too early to give any numbers over what we can do and obviously, we don't know yet when the combination will be closed.

So all of that, we need a little bit more time to have a good discussion on it. Online, I think they grew 14% for the full year -- for the full semester, sorry.

And they accelerated 2% between Q1 and Q2, with clearly being better in Canada and U.S. Vision Direct in Europe growing quite fast on a steady growth.

And EyeBuyDirect also accelerating in the U.S. And this is something we don't report in the same way, but you need to know that the online part of the subdivision is really growing very fast.

Costa, Costa brand, Bolon which is a kind of a proof that the product and the brand is great. For Bolon, for example in China, it's 30% growth.

So it's quite significant, 3-0, so which gives us a kind of serenity that while we fix the product, the issue, then the value of the brand and the attractiveness of the consumer is there. I think that's it.

So maybe just a very quick follow-up. Just on the -- to come back on the well-discussed theme of disruption and if I say that the impact of the disruption is slightly more than what you were expecting at the time of the closing, will that be a fair assumption or would you disagree?

It's not a question of agree or disagree. It's -- we did a new when it would start, when it will happen and so on.

We don't see something very different from our assumption. The timing, we don't need to reach, but no.

No, no, no. It's no bigger than what we anticipate.

The timing will continue.

Three questions from my side, please. The first one relates to Transitions.

You had provided the volume growth in group networks that you had in full year '16 which I think was up 3% or 4%. Do you have this number for H1, just to know how this -- if this has accelerated or not on that side?

The second question relates to margins. I could see in your detailed financials that the margin in the Sun & Readers division jumped by like 500 bps compared to last year, so I was just wondering what's behind this major jump and is that sustainable.

And the last question relates to H2. And excuse me if I play the devil's advocate here, but if we assume that Transitions, the Brazil situation, Bolon and even the pushback continue into H2, do you really believe that there is room to accelerate the H1 growth from where it stands today?

Okay. So Paul will take the Transitions question.

I will take the one on the margin of Sun & Readers and I will take the one on the discussion on H2. So basically, Sun & Readers, again, aside from Bolon, Costa is doing well.

Costa margin is doing well. And the new acquisition we integrated at the 1st of January which is MJS, is profitable.

So a combination of all of that provide us a better profitability in that division which again seems quite encouraging, building this division for the future. H2, well, the reason for acceleration are what, a little bit better forecast for a little bit of growth for the Sun division, continued acceleration in online and also new products which are now in the end of our sales operating team, if around the world and that's why we still believe we could slightly accelerate in H2.

Transitions, Paul?

Transitions, Laurent. Transitions is continuing to accelerate progressively in the first semester of 2017 versus the performance of '16.

So we're getting close to 5% growth. What is very interesting in that is the plan that actually Laurent explained very well in the 18th of February on Transitions which has different facets.

As we roll it out in the regions, for example, in Europe, we have seen very nice acceleration of Transitions, clearly north of this 5% in Europe on the first half. So this is very positive and the focus that had been put on this brand, on the innovation, on the activation at the store level, under -- combining in the media program, the different brands have been proving to be efficient.

So we continue on that route and of course, leveraging more innovation in the product offering of Transitions. Laurent referred to it, the style, color, the flash to mirror and more to come.

And the 5% is volume, obviously?

Yes. You asked volume, yes, I was talking volume.

Thank you, Julien. I think we'll take 2 more questions and then we go to the -- we will go to the end of this call.

So next question?

I have two more. Firstly, on the DTC spend, can you comment on how much you spent in the first half of 2017 and whether you are convinced that DTC remains money well spent.

And question number two is on minorities. Can you comment on whether the minorities to contributions from operations with that relationship of 6.8% is the right ratio also to use for the second half of 2017?

Michael, I don't think we understand or clearly the second question on minority.

Yes. So the first question is on direct-to-consumer spend.

Can you comment on what you're spending or what you spent in the first half of 2017 and whether the spend remains money well spent or not, whether there is, perhaps, in the past, too much excitement around it and perhaps, it's not delivering the level of returns in terms of sales that you may have initially envisaged?

Okay. And the second one on minority?

In minority though, I was just curious because minorities has gone up as a percentage of contribution from operations. The relationship in the first half is 6.8%.

Is that the right ratio to use for the second half of 2017?

Okay. So Géraldine will answer to the second question on the minority and Paul will explain what we're doing on DTC.

On DTC, we have been spending on the first half slightly less which is really a minimum, less than the first half of '16. We continue to focus the spending on the key brands, on the few markets.

And of course, we're leveraging this DTC spending to support the launching of the new product. That is, of course, very key.

And we're increasing the profitability that goes to digital marketing. So that's -- that would be the first takeaway to your question.

So Géraldine, on the minority?

Yes. No, we don't expect the same kind of level for H2.

But we don't look at it as a -- in terms of percentage, as you mentioned, actually. But we don't expect that high number for H2.

Okay. Michael, is it -- does that answer your question?

Yes, it does. But just on the DTC spend.

So are we talking around sort of €60 million, €65 million in spend in the first half of '17? Or is it...

I think we need to come back to you for the -- for that detailed number and the team will do it. We don't have it there.

I think we'd take the last question.

I had two questions, please. The first one is just on the U.S.

market growth. You described as pretty subdued still.

I don't know if you have any thoughts on why we're still this relatively weak point of growth in the second quarter. And how should we be thinking about the dynamic into the second half of the year?

What is it that you're seeing on the ground? And then my second question is just very quickly what the decline was in the Transitions third-party revenues in the second quarter, if you can specify that.

Okay. So your first question in the U.S.

was on the market on our performance?

Correct. Just on the market dynamics exactly, if you can elaborate for us a little bit of what's happening and maybe why the market hasn't picked up yet contrary to what you were expecting.

Right. We always expect it will be a little bit better, but the -- there is a lot of thought, a lot of ideas.

I don't think really we understand very well why. What we have seen is, from the past in different countries, after 5, 6, 7 quarters, it should go up faster, but I have no really scientific deep analysis about why is it like that.

I still believe the U.S. consumer, they need to see better, they need to protect their eyes.

We have seen that in the Sun business. It was quite better in the second part of the year -- in the second part of the -- in Q2.

But for the lens business, we have not seen that happening, so hopefully, it will happen in Q3 or Q4. And for the question on Transitions outside groups, so Paul, you will answer.

Yes. The trend has been around 10% decline in the first half and it's pretty much the same number for Q1 and Q2.

That's very helpful. And Laurent, do you have the industry statistics for Q1 and Q2 for the U.S.

market? And if so, could you share them with us?

For the fact is we have the one for Q1 which is flat. And for Q2, not yet.

But what we hear in the market from our customer is not a lot of dynamic and it's very -- already flattish as well.

So I wish all of you a great summer. I hope you will have a little bit of vacation and you can enjoy them.

And we will talk together again on the 24th of October. And I think we gave you sense that the issue we have, we know them, we will fix them.

The innovation is working very well. And also, we're all geared to prepare the fantastic combination, building this leader of the industry that helps the world to see better.

Thank you very much.