The management is confident of being able to reach the previously set profitability targets, calling for operating margins before investments on store openings of 8 percent in 2002 and 10 percent in 2003. In the 6 months ended June 30, the margin was up to 8.8 percent from the 6.8 percent level of the same period a year ago. The group's operating income (Ebit) surged by 57.2 percent to e25,473,000. At e22,642,000, the pre-tax margin is up to 7.3 percent on sales of e309.3 million, which grew as previously reported by 6.2 percent.

GrandVision's net consolidated income actually declined to e13,264,000 from e74,288,000 because of exceptional gains on the May 2001 sale of its large photo store activities. The results for the first 6 months of 2001 also included an overall profit contribution of e4,020,000 from the photo shops and from loss-making or low-margin optical retail activities in Argentina, Poland and the Baltic countries which have since been sold.

The geographical breakdown shows profit improvements in all the countries. In France, where sales rose by 6.1 percent to e147 million, the group managed to improve income before amortizations (Ebitda) by 13.5 percent to e26.8 million, reaching a 12.6 percent operating margin before amortizations. After amortizations, the Ebit rose by 26.1 percent to a margin of 12.1 percent. The pre-tax profit margin jumped from 7.3 to 11.3 percent.

In particular, the group's Générale d'Optique chain in France reaped the fruits of a major reorganization and expansion program that has lasted 4 years, improving its Ebit ratio from 7.3 to 12.2 percent, or the same level as Grand Optical. Its pre-tax margin moved up from 5.4 to 11.8 percent, and it should improve further. For its part, the Grand Optical chain in France raised its pre-tax margin from 8.3 to 10.7 percent during the period and posted excellent scores in July and August. The Solaris stores in France reached an Ebit margin of 10.4 percent, improving the pre-tax margin from 11.2 to 12.7 percent. They could have performed better if the weather had been sunnier in the South of France during the 2nd quarter.

The Ebit progressed by 36.8 percent and reached an 8.7 percent margin for the group's Vision Express chain in the UK and Ireland, resulting in a higher pre-tax margin of 8.4 percent after a boost in cash flow and interest income. Sales increased by only 2 percent to e120.9 million in a market that probably fell by 0.8 percent, but higher average prices boosted the bottomline. About 10 percent of the chain's operating profit of e10.5 million came from its independently owned so-called joint venture stores, which performed even better.

The group's retail operations in other European countries continued to lose money, but their combined operating loss decline by 66.7 percent to a negative margin of 3.7 percent on sales of e40.2 million. In terms of Ebit margins, the group's stores in Belgium and Luxembourg improved sharply from 1.1 to 8.3 percent, while those in the Czech Republic moved from 9 to 9.5 percent. Those in Spain and Portugal turned around from a negative margin of 1.1 percent to a positive one of 2.5 percent. The group's 3 stores in Switzerland reduced their negative margin from 29 to 10 percent.

The growing network of Grand Optical and Solaris stores in Italy reduced its losses from 11 to 10 percent of sales, but it would have performed better without the horrible weather in the country, which virtually wiped out 10 percent of its budgeted turnover. The group opened 5 new stores in Italy during the 1st half of 2002, and its larger urban stores in Rome, Padua and Verona are taking longer than expected to generate satisfactory results. In view of the situation, GrandVision has decided to make a pause in its Italian investments, opening stores for the most part only in new shopping malls, including one in Novara.

The investment budget will remain conservative until the group fulfils its 10 percent profitability goal. Between 15 and 20 new stores should be added to the network in 2003, as compared to 18 in 2002. The 9 stores opened in the 1st half of this year included 2 GrandOpticals and 2 Générale d'Optique units in France.

Meanwhile, GrandVision's gearing, which had been boosted by the sale of the photo shops, has been readjusted to a more normal level of 21 percent of equity, which was down to e229.5 million as of June 30. The group used its vast financial resources to buy e34 million worth of its own shares at an average price of e17.20 each and then cancelled 2,595,691 shares worth e44 million, representing 10 percent of its total equity. The transaction will allow the management to continue its share repurchase program within the authorized limit of 10 percent of the new equity.