Good evening. This is the conference call operator speaking. Welcome to the presentation of the first half 2018 results of the Brunello Cucinelli Group. I would like to remind you that all participants are in listen-only mode. Following the initial presentation, there will be an opportunity for Q&A by the financial markets. The speakers will be Mr. Brunello Cucinelli, President and CEO of the company, Mr. Moreno Ciarapica, CFO, and Mr. Pietro Arnaboldi, Head of Investor Relations. In order to receive help from an operator during the conference call, please press star followed by zero. I'd like to give the floor to Mr. Brunello Cucinelli. The floor is yours.
Good evening, everyone. Before we start, I would like to tell you that Kiara, who's our regular interpreter, is now on holiday, she's been replaced by Anna Maria, and she's new this time for us.
I will try and speak a bit more slowly so as not to create any trouble for the interpreter. Thank you very much. First of all, dear friends, analysts, and investors, I would like to thank you on behalf of the company and of ourselves personally. I hope you had a nice holiday. I hope your vacation was nice, and you were rested, and you have regenerated your energy, and I hope you also found the time to somehow discuss with yourselves. This is a big issue. We no longer have the time to talk to ourselves and discuss with ourselves. I spent about 10 days with my family in China, and I'd like to share this pretty funny event with you. Sorry, I said China, but actually, I was in Sicily. That was a lapse of the tongue. I was in Sicily.
I was in Syracuse, which is a fantastic, beautiful city. Before going to Syracuse, I had read something about Plato, the Greek, who in 400 before Christ, traveled to this fantastic city. He wrote something about Italians at the time, and he wrote the following, "These Italiotes and Syracusans who actually revel twice again and never want to sleep alone." Back then, he found that this kind of behavior, this kind of lifestyle, was the cause and reason for the political instability of the then government of Syracuse. This is 2,400 years ago. Plato went on saying that the only way to correct the situation was that of putting in place a class of kings and philosophers who, of course, had to be educated in Plato's doctrine. This sounds very contemporary to me. I told you before, I'm 65 years old now.
I have seen 65 governments in Italy, this appears to be our typical Italian culture. I'm sure you understand we're not concerned about pretty much anything by now. How would I like to organize this conference call? I will tell you about the big performance data, then our CFO, Mr. Moreno Ciarapica, will provide you with details, and then I will speak again later and give you some color about 2018. I will give you visibility on 2019, too, because we actually almost concluded the sales campaign for 2019. Then I would like to talk about the products, the web, and this big event we're going to organize on the 4th of September with the press here in Solomeo. As usual, all the staff is with us. I'll read some documents to you.
Net revenues stand at EUR 269.5 million, +11% at current exchange rate, +11.9% at constant exchange rates as against the lower performance of last year. EBITDA stands at EUR 46.2 million, +11.2%, and net profit, normalized net profit, stands at +19.7%, i.e., EUR 23.8 million. The net profit including the Patent Box benefits stands at 29. 9%. The Italian market increased at 2.4%. At constant exchange rates, this increased a bit more. You know that the exchange rates actually offset virtually all the growth in North America. We grew virtually no distribution channels. Retail was +7.1%, wholesale mono-brand +12.4%, and wholesale multi-brand +10.7%. CapEx stands at around EUR 25.2 million, and within that pretty strong plan for 2018-2020, which is very important for us to keep our brand leadership and to support our growth, and we'll get back to that later.
Net financial position stands at EUR 44 million as against EUR 59.4 million as of June 30, 2017. This is my view of this first half, and it is with great satisfaction that we disclose the results for the first half of the year. Significant figures that report constant growth of both revenues and profit. The good performance of fall/winter sales allow us to confirm our positive outlook for the second half of the year. We expect 2018 to close with double-digit growth of both EBITDA and profit. The excellent performance of the 2019 spring/summer collections, both for menswear, with the sales campaign now finished, and for womenswear, which is now in the midst of the selling season, prompts us to embrace a very positive outlook for 2019, which we expect to grow double-digit.
This is a major development that we want to see fully in keeping with the founding values of our company. The product quality, always with high manual skills, balanced growth, which we envisage, as always, wisely broken down between menswear and womenswear, amongst sales in Europe, the West and the East, and among different sales channels. Our business philosophy, which is centered around respect, support, and love for our land. I'm supposed to yield the floor to Moreno, who's going to provide you with more details. Thank you.
Thank you, Brunello. Good evening, everyone. We have already disclosed the preliminary sales data on July 12th and confirmed it. I would like to switch to slide 11 in our presentation, comparing the data of the first half of 2018 with the restated data as of June 30, 2017.
Let me remind you that starting on January 1st, 2018, we implemented the new IFRS 15 accounting principle that required a different accounting for some types of contracts. In our particular case, the contracts pertaining to sales made within multi-brand locations managed under the concession formula. The implementation of the new accounting principle means we increased net revenues and operating costs, rent in particular, by the same amount, i.e., EUR 3.9 million as of 30th June 2017, without this causing any variation in the absolute value of EBITDA, operating profit, and net profit. Let's now start with my comments on revenues. Sales at June 30th grow by 9% at the current exchange rate and +11.9% at constant exchange rate, meaning that nearly three percentage points were lost because of negative Forex impact. Once again, let me point out that we carefully hedged Forex.
As you know, this is aiming at neutralizing the impact of currency fluctuations on the absolute value of EBITDA. In order to reach that objective, the total revenues estimated to be held in foreign currencies are hedged right when we set the price list for our collections, net of the cost sustained in foreign currencies. The Forex impact for revenues is related to the part of sales that are unhedged, which is more or less the same amount of the cost we estimate to sustain in foreign currencies. This undergoes foreign exchange fluctuations, and this is counterbalanced and offset by the same and contrary impact that foreign exchange has on costs. The absolute level of EBITDA doesn't change substantially.
Considering the current exchange rates and the current hedging situation, it is reasonable to expect, by the end of the year, a negative impact of Forex, which is decreasing slightly vis-à-vis the first half of 2018. Anyway, it will be anywhere between two and three percentage points. The sales are going to increase double digit at constant exchange rates in 2018. EBITDA for the first six months of 2018 stands at EUR 46.2 million, with an improvement of margins of about 40 basis points, from 16.7% to 17.1%. This increase in margins is what we consider to be ordinary on an yearly basis for the above-mentioned aspects on the impact of foreign exchange. The EBITDA performance increased by 11.2% vis-à-vis the EUR 41.6 million of EBITDA as of June 30, 2017.
We had an absolute value increase of EUR 4.6 million because of the good performance of like-for-like sales, plus 3.8% as of June 30, 2018, and the excellent sell-out of sales. The impact was suffered by the channel mix and the wholesale revenues from the multi-brand wholesales increased their incidence from 42.3% to 43%, also because of good growth in the Greater China geography. All of the above mean that the first margin stands at 65.3%, basically in line with the first half of last year, and the incidence of operating costs was reduced from 48.7% to 48.2%, and the relative amount as of June 30, 2018, stands at EUR 130.1 million as against EUR 121 million last six months. Depreciation with an incidence which is stable at 4.4%, increased by EUR 1.2 million up to EUR 11.8 million as against EUR 10.6 million in the last six months. Net financial charges are decreasing.
They're now at EUR 1.2 million as against EUR 3 million of June 30, 2017. This drop was favored by the reduction of financial burdens and the drop in the average net financial position, mainly because of the accounting of foreign exchange hedging. Meaning that profits on foreign exchange counterbalance and offset the previous unrealized losses on foreign exchange, which was connected to intercompany financing in non-EUR currency, which were temporary by nature because they are subject to the evaluation of exchange rates at the end of the accounting period. Excluding for estimates the fiscal benefit coming from Patent Box, as you see in the bottom right corner of slide 11. Net income normalized for the first half of 2018 stands at EUR 23.8 million, up 19.7% as against the EUR 19.9 million of 2017, as of June 30.
With a tax rate which is about 28.5% as against the 29.1% in last six months. The slides 12 and 13 show sales margin and operating costs. The costs of personnel from 17.5% to 17.4% grew by EUR 3.6 million, up to EUR 47 million as against EUR 43.4 million last year, mainly because of more personnel hired in the new DOSs. Four new boutiques and two conversions were operated in the last 12 months, a limited increase of human resources in the headquarters, which sustains the important ongoing development projects and in particular, the digital project. Rents account for 12.7% as against 13.2% last year. They increased by EUR 1.5 million as against the first half of 2017. This increase is also due to the growth of the retail network and some important extensions of some store locations.
We always attach a lot of importance to investments in communication, which are fundamental to strengthen and protect the brand image, both in the physical and in the digital world. The relative incidence goes up from 5% to 5.5%, meaning EUR 2.2 million more for the increase of digital communication activities in particular. Let me now talk about working capital. Slide 14 shows a reduction from EUR 141.6 million in the last six months to EUR 137.9 million as of June 30, 2018, with a drop of EUR 3.7 million. The management of inventories is also very positive. The percentage of net revenues in the last 12 months is 30.2%, which is basically in line with the performance of 31st of December 2017, when the amount was 29.2%, which we consider to be healthy and structural for our business model. Inventories account for EUR 161.5 million as against EUR 158.6 as of last year.
It's a limited and structural increase of the absolute value due to the select new openings of new direct stores, some conversions to the [OFs], extensions and new spaces directly managed within the department stores, luxury department stores, which is well offset by the positive impact of sellouts. Trade receivables stand at EUR 64 million as against EUR 54.4 as of June 30, 2017. This increase is mainly due to a EUR 6.8 million increase in the second quarter because of the bigger incidence of wholesale sales as compared to the second quarter of 2017. We decided to extend to the important and historic multi-brand Russian customers, the same payment conditions we use in established markets. Whereas in the past, a part of the payment had to be paid as early as when orders were passed.
For this reason, the performance of trade receivables as of June 30, 2018, should be seen in the light of the credit position we have with wholesale multi-brand and mono-brand customers that are still having to pay their invoices. We actually stand at a physiological level. Trade payables stand at EUR 69.8 million as against EUR 61.9 million as of June 30, 2017, because of the physiological increase, which happened mainly in the second quarter of the main costs related to an increase in the business volume in the raw materials, third parties, manufacturers and communication. Other net credits and debts are negative by EUR 17.8 million as against EUR 9.5 million as of June 30, 2017, and they're mainly related to the fair value assessment of the currency hedging instruments. Let me talk about CapEx and net financial position.
In the first six months of 2018, we're at slide 15 here. CapEx invested was EUR 25.2 million, and they're a part of the multi-year plan that we managed to make the company contemporary over the long run. Commercial CapEx in the first six months of the year was EUR 18.1 million, mainly for select store openings, the extension and renovation of showrooms that are always very contemporary, the increase of sales surface in luxury department stores, the extension of prestigious boutiques in the most important shopping streets in luxury capitals globally. In particular, I'm referring to the opening of the new and bigger Monte Carlo boutique that opened in July.
The CapEx invested for production, logistics, IT, and digital was EUR 7.1 million, of which EUR 3.3 million for digital and IT infrastructure, whereas the remaining EUR 3.8 million was invested in constant renovation of production installations, which allowed us to make all activities managed with very renewed and state-of-the-art logistics facilities. On June 30, 2018, we also acquired a minority stake in our Russian subsidiary for EUR 6.5 million, so that the parent company now holds 100% of the Russian subsidiary, as against 62% before this deal. This had an impact of the net financial position of June 30, 2018. The facts of this deal have been accounted for under the net assets reserves, in line with IFRS accounting principles. Slide 16 shows that net financial position goes down to EUR 44 million as against EUR 59.4 million of June 30, 2017.
This decrease mainly related to the generation of cash from operating businesses and the healthy management of the net working capital. Net financial position is normally at its peak between June and September because of the season performance in sales, and as usual, it will go down in the last part of the year. Considering what I've illustrated so far with the investment level for 2018, which is in line with what we explained last March, plus the purchase of the minority stake of the Russian subsidiary, considering the improvement of the working capital, because of all those reasons, we expect the financial debt for 2018 to be in line with 2017. Let me remind you that as of December 31st, 2017, the net financial position was EUR 16 million. That's all for me, and I'm happy to yield the floor back to Brunello. Thank you.
I would like to give you some brief overview of the bigger issues for 2018. Eight months have gone by. Things are doing very, very well. The winter collections in multi-brand stores that are always very important for us to understand consumer taste, and in mono-brand stores too, have an impact which is very young, and it's about luxury, it's about chic. We're very happy to see younger and younger customers. As far as the brand is concerned, we think it's commanding a very good atmosphere around itself. I would like to point out that, as Moreno said, we bought a 38% stake in our Russian subsidiary. We're very happy with that deal. These customers are very, very important right now. They tend to be in their 20s, mid-20s, and at times, they were a bit displeased when we asked them to pay 30% in advance.
Let me tell you something which I found very interesting and nice. There's a very important customer of ours. He only buys from Italians. He has a company in Italy, and during a luxury meeting in Milan, he said something interesting. He said, "You know, I've been buying from you Italians for 25 years now, and you always ask me to pay 30%-40% up front, and I know you're not asking your other clients the same, and I don't understand why." Treating Russian customers just like the other customers we serve globally is much, much nicer for us. For us personally, payments have never been a problem in the company. I know it's a privilege to work without any kind of problem in payments. We did incur losses on credits in our history, but it was always contained to something like 0.1% or something.
This is a privilege for us, and so we imagine 2018 is going to be healthy, good, and strong, and we expect profit to grow and EBITDA to grow, too. Let me now speak of 2019, 2020. The projects, investments, expectations. Generally speaking, we would like to confirm everything we have been reporting during the May conference call. I'd like to dwell on 2019 for a while now. For 2019, the spring/summer collections are nearly finished in terms of sales campaigns. Womenswear is halfway through the sales campaign. Menswear is completed. Our impression is that customers think the collection is young and sophisticated. Let's talk about menswear first. I think menswear is a very, very interesting collection right now. We have completed the sales campaign for menswear. Our impression is that the collection is young, it's sophisticated, it's very Italian.
There are many details that really speak of an Italian collection, and this is really important, especially for what is a bit tricky right now, which is suits. Businessman suit is very difficult right now. People always ask themselves, what will men wear in the next few years? What I think is, if during the weekend, people are quite sporty in the way they dress, of course, wearing sporty things make people look younger. Monday morning comes, and people need to wear an elegant suit to go to the office. An elegant suit would actually make people look a bit less young, a bit more conservative. This is why we decided to work hard on this. We want to work on the actual cut of suits, of the styling, with a tie, without a tie, with contemporary fabrics suitable for each season.
Even the sales associates that work in stores need to actually provide customers with advice on how to style and how to wear suits, a bit like consultants. We do feel that suits are going to go through a renewed success in the near future. You know that recently, an American publication interviewed us, and in their Best of Best section, they compared us and their beloved Ralph Lauren. What they said eventually was that Ralph Lauren and Brunello Cucinelli have shaped the last 30 years of fashion, which is extremely pleasing for us, of course. This American magazine said that us and Ralph Lauren were the two fashion designers who redefined the boundaries of menswear in the last 30 years.
Ralph Lauren is the main supporter of the iconic American style, whereas the latter, that is to say, ourselves, is the pioneer of chic in the 21st century. Of course, we're very pleased to read that. I'd like to report also on a small, new, very important project, which is the Sartoria Solomeo, the tailor shop of Solomeo. What do we mean when we speak of the tailor shop of Solomeo? Actually, we do made-to-measure garments. In a way, we are trying to make them look younger. If you go to a store, the tailors you find at the stores are people who are in their mid-30s. Normally, they tend to be younger in terms of their attitude towards tailoring. Bespoke tailoring is classic by nature. Actually, bespoke tailoring was first created and first invented to hide the defects of people's bodies.
Normally, suits were so wide that you didn't see the body at all. We started this beautiful project in our top stores globally. The idea is that of doing bespoke tailored suits, especially for younger customers, because I feel there are many clients in their 30s or mid-30s or 40s that are hyper-rich, and they want bespoke suits, not because they need to hide their body, but because they like the idea of having a suit which is tailor-made for them. You walk into the store, you find a young tailor who's going to provide you with the right advice and may want to tell you that this year, a tacked suit is more fashionable than a pinstripe suit. This is the idea. Personally, I'm 65 years old, and I would not really like to receive advice from someone my own age.
I would be much happier to talk to a younger tailor who can actually update me on whatever is younger and more contemporary. It's a kind of friendly suggestion that we expect from the tailors. This is the menswear project, which we call La Sartoria di Solomeo, in 25 stores. The womenswear collection has been presented about a month ago. We're particularly pleased with it. The multibrand stores assessment is very important. Of course, at the end of September, during the Milan Fashion Week, we'll receive the assessment of the press, which is just as important. The first assessment we had from the multibrand stores are very favorable. The monobrand stores were very favorable, too, but you know we value the judgment of multibrand stores even more. I'd like to point out again that many people said this is a very young collection.
Just like in menswear, we have the possibility and the desire to dress a young person who's chic and, of course, pretty wealthy, because the average price is pretty high. We expect the press to come to the Milan Fashion Week and to pass their judgment on our collection. We would like to convey you the very positive outlook we feel for 2019. We still look at good growth. We're looking at double-digit growth for EBITDA and sales alike. I'd like to say something on CapEx, on investments in general, and not just for this month or for next year, in general. We believe that, generally speaking, the web tends to messify things. Showrooms need to be renovated and refreshed every six months or so. Otherwise, the collections we are presenting doesn't look fresh, because the showroom doesn't look fresh enough.
What happens is that clients walk in, they take pictures or videos of the showroom, and if there's nothing new, next time they walk in, even though the products are new, the whole look of the collection wouldn't be that fresh. Let me just make a practical example here. You know the famous Pitti menswear show. five or six years ago, those were redesigned as an average every three years, whereas today, they are redeveloped and redesigned every single season. The same is true for our stores. We need stores to be modern, to be chic, to be contemporary at all times. This is true for collections, and this is true for 2019 in general. Now, I would like to talk about the digital project we're embarking on. We're particularly happy with the whole project.
We know we are artisans, and we love to be artisans of the web, too. We have built ourselves the Western market, which is now very good, and we are starting working on something special to properly tackle China and Russia. Both markets have some commercial issues and logistics difficulties and administration challenges, of course. Six, seven months down the road, we are supposed to be more or less ready. We know from the website traffic that the Chinese customers are extremely interested, but we should now have an opportunity to ship to that market as easily as to other markets, too. We are very pleased to go back. In September, I was personally invited to go back to that very important meeting in San Francisco, where both of us will be invited, and once again, we'll talk about human privacy and technology.
I'm extremely proud of that and very happy of that, also because the connection with Max Tegmark has become stronger and stronger in all markets. Before we part, I would like to say a couple of words on this event, which is so important for us, which is going to be held here on September 4 with the national and international press. We expect about 500 journalists here, which is certainly not bad. The first thing we hope is it's not going to rain, because hopefully, everything's going to happen outdoors. Both in the countryside and in the piazza, we will enjoy a beautiful outdoors. As you may know, the restoration works, both for the hamlet and the periphery, are nearly finished.
I would also like to point out, as usual, that all those works have been performed by my family's foundation because we would like the company to work exclusively in its headquarters and in its gardens, whereas all the rest is being taken and care of by my family's foundation. This work has been, frankly, pretty expensive. It's been going on for 30 years. Today, we're really happy to see that these 500 journalists will come and see the outcome of this work. They will see both the town and the periphery. They will be able to see both the town and the valley. You know that the most burdensome thing here was the acquisition of those 50,000 square meters, 100,000 cubic meters of industrial sheds. This actually totally changed the look of the periphery around our little town, around the hamlet.
If I look at the company for the next 200 years, of course, it's not little. I see that as a possible engine of development for the whole valley. What have we built in the valley? By the way, you're all invited to come see the valley as soon as you can. First of all, we've built a theater, which is a kind of a layman's temple. Then in the center of the valley, we've built a vineyard, which is a bit like a symbol of Mother Earth. I think in 1,000, 1,500 years' time, it will be still standing there. We think it's a kind of a monument to man's dignity. I think it's going to stand there in the next 1,500 years, like Vitruvius and Leon Battista Alberti told us.
It's built with a technique which is a bit like the Colosseum technique, I'm sure it's going to stand there forever. I always come around and look at it, I tell my people, "Well, keep it going well," because I come around and walk around it at night. If there's anything that doesn't go well, I notice immediately. I really hope it's going to be a special evening. It's going to be a special communication event. It's also going to display our company's culture to the whole world. We wanted to show you the way we work, the place where we work, the value of our land, what it means to work in a little town, in a little hamlet. I think we can actually go back and work in little towns because we're fully connected.
It might have been more difficult to do that before the internet, why can't we work in small towns now? It's easier to get there. It's more quiet and silent. We're connected anyway. We'd like our 500 journalists to bring back home an idea and a vision for the next 500 years of the company. We'd like our guests to go back with some ideas on the big issues of life, the right balance between profit and the common good, a kind of humanistic, contemporary capitalism. We would like our guests to take back home our concept of being custodians of all creation. Maybe because of my age, but I think we are temporary custodians of the places we inhabit. At the end of everything, we would like to convey something to our guests. We are trying to do our things well.
We're trying to work in full respect of human dignity. Even before September 4th, we would like to thank you all. Maybe some of the journalists are listening to us now, I would like to thank you for supporting our corporate culture. We would like to thank analysts for sharing our corporate culture, too. We would like to thank shareholders, hopefully, we'll be able to meet their expectations at all times. We actually always try to work based on those big ideals on which we have based our company, our great ideals are beauty, humanity, and truth. This is pretty much everything from me now. I wish to extend all our thanks and warmest thanks to you. Come and join us and see us as soon as you can. Thank you. Hopefully, it won't rain. Ready for questions?
Okay, this is the conference call operator. Now we can open the Q&A session. If you have questions, please press star followed by one on your phone. To exit the list, press star followed by two, and please speak into your microphone to ask questions. If you need to ask questions, please press star one now. No questions? Let me remind you, if you want to ask questions, you can press star one on your phone now. The first question is from the conference call in Italian, and Francesca Di Pasquantonio of Deutsche Bank is going to ask the first question. Please.
Good evening, everyone. Hello, Brunello. Hello, Francesca. I hope you spent a nice summer. "Personally, I did," said Mr. Cucinelli. Really pleased to hear that. I have a question on something which seems to be new to me.
I regularly check your website, and I see you're giving more space and attention to products for the home, for leisure, for travel. I was wondering whether you're updating your strategy and your ambitions in those product segments, complementary, let's say, product segments.
Well, this is a very interesting question, as usual, Francesca, you're asking. On one side, we would like to be identified with a ready-to-wear company, which is what we are now, this is for sure. At the same time, we would like to really focus on contemporary men's suits because men are undergoing a major change. Men feel much younger when they wear informal garments, and they feel much more classic when they wear formal suits. However, when we work and when we do business, we feel the need to be more formal. We are working hard on these products.
Actually, we work more than you would see because many products do not really end up hitting the stores, but we want them to understand people's taste. If you go to the newest store we opened in Monte Carlo, there's a table where you can actually sit down and eat. The prince came to see us, which was very pleasing. You can actually sit down for breakfast. We organize small dinners there with six or seven couples of clients. You can actually have dinner there, look at the products, enjoy a book. You find a table set to suit our taste. We're not selling those products, Francesca, yet, but you know our history. You know we are trying to experiment with things to create some taste, to create a specific taste for the brand in colors, in the way we're setting the table.
We want this to look very Italian. Even for men's suits, we want them to look very Italian, to be worn by Italians, and this is a very typical taste. We're working a lot on the allure of the brand. This is what we're doing now.
Okay, thank you.
Well, thank you, as usual.
If you want to ask a question, please press star followed by one. If you have questions, please press star one on your phone.
Of course, if you have questions, feel free to get back to us tomorrow or whenever. If you don't have questions now, please pray that it doesn't rain on September 4th, and then we'll read in the press what these 500 guests will think of the evening.
I hope they'll be able to take back home some peace of mind, some fair work, some of the ideas we have tried to convey and to talk about earlier. Thank you. Thank you all, especially I wish to thank the investors and analysts for successfully conveying and communicating our corporate culture, and we're very honored by that. Thank you again, and please keep believing in our beautiful Italy. As Plato said in 400 Before Christ, this fantastic Italy is a bit crazy today, but we do believe in the country firmly, and we are amongst the biggest luxury manufacturers globally, and we are second to Germany only for the manufacturing industry in general. Thank you. Thank you all. This is the conference call operator. The conference is now finished. You can disconnect your phones. Thank you.