Earnings Call: H2 2017

Mar 7, 2018

Good evening. Chorus Call operator speaking. Welcome to the presentation of year results for the 20 17 fiscal year for the Rene La Cucinelli Group. I'd like to remind you that all participants are in listen only mode. Following the initial presentation, there will be an opportunity for some Q and A from the financial markets. Speakers will be Brunello Cucinelli, President and CEO of the company Moreno Charapica, CFO and Pietro Arnabaldi, Head of Investor Relations. In order to receive help from an operator during the conference call, press star followed by 0. Now I would like to give the floor to Mr. Brunello Coccinelli. The floor is yours. Good evening, ladies and gentlemen. I'll try and not speak too fast so that the English listeners will have an appropriate path for the translation. Well, first of all, I would like to thank you all, 1st and foremost, investors, analysts, journalists. And we really want to thank you warmly from the as a as a business, as a company because we celebrated our 40th anniversary just a few days ago. In my opinion, we have enjoyed an experience of life and work, marked and fought with humanity, esteem, respect. And the way that we have to speak to each other, to interact with each other has always brought us to make important decisions whilst respecting the creation along the process and also respecting the great values of the human being because our life has always been human centric. And I say that the great values are always the same, justice, truth, beauty and love. Last night, I was playing with my granddaughters, Ricardo's and Camilla's daughters, and I always have so much fun with them. They amused me. And then suddenly, I was hit by this beautiful piece of news. The 2 Koreas are meeting to make peace. So I basically rediscovered a letter that I had read some time ago of a Russian think of the beginning of the 20th century, who at a certain point sent this letter to his children. And I'd like to read out a couple of paragraphs for you. And I was really touched by these words. He said, look at the stars more often. When you feel sorrow in your soul, look at the stars or at the blue sky, when you feel sad, when someone offends you, when you struggle accomplish something or when you are overwhelmed by your inner storm, get out and stare at the sky. That's when your soul will find peace. Pavel Sorensky. And I have to say it is a really beautiful expression and statement. So thank you for your attention. And I'd like to do the following. I will give you just the highlights of the company, then Brunello and Charapica, who is sitting just opposite me, will drill down to a few more colors and details. Then I'll resume the floor, and I'll give you some visibility on 2018, some visibility on 2019 2020 planning. Then we'll be talking about products and markets. And last but not least, the fascinating world of the online business. So net revenues, EUR 503,600,000 plus 10.4 percent at current exchange rates versus 31 December 2016. €10,900,000 was the improvement cost of exchange rates. EBITDA, €87,500,000,000 plus 11.8 percent. Net 5,000,000 plus 11.8 percent net profit, EUR 42,100,000 plus 13.4 percent, excluding the Patent Box benefits. And I'd like to make a digression or an addition here. You see from the aesthetic point of view, we prefer to highlight the 13.4% adjusted profit and not the 41.4%, including the Patent Box benefits? Because you see, frankly speaking, it would not look good to show the great leap of profit in a year, whereas we have always been supporting chasing a fair profit and moderate growth. So this is what I wanted to say about profit. Then we enjoyed significant growth in revenues in all geographies: Italian market, plus 11.2 percent euro, plus 10.6 percent North America, 6 0.6%, but it's because of the ForEx situation Greater China 36.2 percent Rest of the World 5.2 percent. Then sales improved in all distribution channels. Retail monobrand, EUR 19.6 percent plus Wholesale monobrand, plus 1.6 percent Wholesale multibrand, plus 6.2 percent. And then there was an important reduction of the net financial position, which dropped to EUR 15 700,000 as of 31st December, visavis EUR 51,000,000 last year. Investment plan CapEx is €35,700,000 mainly commercial in nature, always focusing on safeguarding our brands, both in the brick and mortar channel and the online one, but we will be dwelling on this later on. And then the BOD will propose the distribution of EUR 0.27 dividend per share equal to 35.9 percent payout ratio. So this way, I think that I have given you an overview, and I'd like to close by saying that 2017 has ended, reporting once again particularly pleasing results and showing a growth path that is consistent, moderate but sound year in, year out. This growth is pursued hopefully both in the physical and online world in a balanced manner, and it has resulted in our business crossing the EUR 500,000,000 revenues threshold in achievements that makes us very, very satisfied. Then another important point, the good performance in our spring summer sales, the excellent sales campaign in fallwinter20 2018, which is now coming to an end and the very special feedback from the national and international trade press seem to indicate that yet another positive year lies ahead, featuring double digit growth in terms of both revenues and profit. Our appealing development projects and the great brand protection efforts online are the pillars of our daily work, a work that fascinates us and enables us to enthusiastically pursue and seek a good life. So I'd now like to give the floor to Moreno Charapica, who will be giving you more colors, and then I'll resume the floor later on. Thank you. Thank you, Brunello, and good evening, everybody. Following the release of preliminary data preliminary revenues on January 8 that were confirmed by the final data, I would now move to Slide 11 of our presentation. And I would start from the improvement of EBITDA margins that went from 17.1% last year, an adjusted figure, excluding the nonrecurring personnel cost amounted to EUR 1,500,000 and then moved to the current 17.3 percent with an increase of 20 basis points approximately. We consider this 11 point 8% growth of EBITDA a healthy one, and this growth goes together with the 10.4% increase of net revenues in line with the indication that we have always communicated to the financial market. The increase of EBITDA margin is strictly linked to the first margin increase that went from 65% to 65.2% against an incidence of operating costs on sales stable 48.8 percent 0, sorry, percent. Amortization amounted to EUR 22,700,000, increasing by 13.3 percent versus EUR 20,000,000 2016 with an incidence and impact that's moved from 4.4% to 4.5%. We expect a slight increase of incidence at the end of the year 2018 due to higher amortization depreciation that will be in the financial statement due to the investments in 2018. The impact of net financial expenses moved from 0.7% to 1%, considering a significant reduction of the average net financial position, and this increase is to do with ForEx development. We would like to remind you that this increase is mainly due to the accounting of the unrealized losses on ForEx having to do with intercompany funding in foreign currency that are temporary in nature because they are subject to the valuation based on the exchange rate. As to 2018, considering the forecast of all financial institutions and whereby the volatility of ForEx could not be as strong as in 2017, where it reached its peak, we expect a reduction of net financial charges. Let's now take a look at 2017 net profit excluding, as Berenno was saying, the benefits of the ensuing from the patent box linked to the agreement with the Italian Inland Revenues Authority for 20 fifteen-twenty 19. Benefits for 20 fifteen-twenty 17 amount have amounted to EUR 10,400,000 EUR 4,000,000 of which having to do with the last year. 2017 net profit, excluding the tax benefits of the Patent Box, amounted to EUR 42,100,000 as shown in the box bottom right on Slide 20 11. And it displaced 13.4% growth visavisa net profit of €37,100,000 in 2016 with an ordinary tax rate that dropped from 30.5% to 29.2%. We consider this tax rate as ordinary and foreseeable also for the next few years, net of the future benefits relating to the Patent Box. And for 2018 2019, they will be accounted for in the relevant year, and they will only be quantified when drafting the relevant financial statements. We could imagine more or less the same amount as in 2017. Now moving on to Slide 12, we take a look at the first margin operating costs with the increase of the first margin driven by the business evolution, the like for like sales results that were very positive and the channel mix. The weight of retail revenues went from 49.6% to 53.7%. 2017 like for like amounted to 4.4%, whereas the like for like of the first half of the year sorry, the early months of the year between the January 1 February 25 amounted to 4%. That performance in line with the very same level between 3% 5% that we have always considered as sustainable and appealing. The like for like developments, as already anticipated, they fully represent the performance of our collections on a half year basis. And this is the reason why starting from this year, we will share the like for like performance as of June 30th December 31st. The operating cost increase was in line with the business performance and the incidence is stable at 48%. The incidence of personnel costs went from 17.5% to 17.6% upwards. And the reason was the arrival in the 2017 consolidation perimeter, the arrival of the people staffing the new direct managed spaces for conversions and for net opening and the 5 shop in shop in the luxury department stores of Holt Rent in Canada, which were previously managed with a wholesale formula. Rents the incidence of rents went down from 12% to 11.7% and the increase by EUR 4,000,000 from EUR 55,000,000 to EUR 59,000,000 has to do with the development of the retail network, including the aforementioned full opening and full conversions besides some extension of shops. Investments in communication went up from EUR 24,700,000 to EUR 28,700,000 with an incidence on sales moving from 5.4% to 5.7%, with acceleration in the second half of the year, driven by the investments on the digital channel. Other general operating costs went up from €59,800,000 to €65,700,000 and the incidence on sales stayed unchanged at 13.0%. The increase has to due to higher IT and digital costs, development and maintenance on top of the costs needed to in source the online boutique. Now moving on to Slide 14. We and the income statement sorry, balance sheet, we take a look of the net working capital and its incidence on sales from 28% to 25.2%. The management of the inventory was very positive, reducing from €154,000,000 to €152,600,000, with an incidence on sales dropping from 33 point 2,600,000 with an incidence on sales dropping from 33.9 percent to 30.3 percent, a level that we think might represent a healthy balance in our inventory management, also considering the limited number of new direct boutiques to be opened. In the trade receivables went down from EUR 45,200,000 to sorry, from €47,000,000 to €45,000,000 following the healthy and positive management of cash ins and the fact that the online boutique, the 4 boutiques in Moscow and the 5 Shopee Shopee department stores were actually converted to direct management stores. Trade payables, slight increase there, EUR 65,300,000 against EUR 63,000,000. And the other assets and liabilities decreased from minus EUR 9,400,000 to minus EUR 5,600,000, which was mainly to do with the fair value evaluation on the derivatives, the hedging derivatives. Investments on Slide 15 amounted to EUR 35,700,000 in 2017. And as usual, their aim is to safeguard the exclusivity and the prestige of the brands, both in the physical and online channel as well as investing in the IT platforms that we keep to maintain cutting edge. In the following years, we will also maintain quite a high level of ordinary investments, which should be around EUR 120,000,000, EUR 130,000,000 in the 3 year period 2018 2020. Debt reduction performed in an excellent manner. Debt went down from EUR 51,000,000 to EUR 15,000,000 driven by the cash generation of operations and also the positive contribution of the trade working capital. Cash generation, therefore, absorbed investments fully €35,700,000 and the payment of €10,900,000 of dividends for the 2016 that represented a payout ratio of 29.9 percent. In 2018, we will be still pursue cash generation in order to absorb investments that we expect and also to absorb the increase of dividends and payout that went up from €29,900,000 to €35,900,000 with a net financial which at 31st December 2018, could amount to 0 and to then improve the following year. And then finally, on Slide 17 shows how we were able to reduce debt by, however, maintaining over the years an important level of CapEx and also progressively gradually increasing the payout. And one last thing about the hedging, ForEx hedging and the impact of foreign currency. So before giving the floor to Bonello, I'd like to devote some time to the very careful ForEx risk hedging that we carry out so that in 2022, we will preserve our margins also despite the volatility in ForEx. Our hedging policy, as you know, in the currency has a target to neutralize the value, the absolute value EBITDA from the impact of ForEx fluctuation. So when the price list of collections are defined, estimated revenues are always hedged. And then a part of the revenues, which amounts more or less to the cost in foreign currency, these are not this part is not hedged and it is subject to ForEx fluctuation. But if the currency and ForEx impacts have mainly is mainly linked to this bank chunk of the revenues. We want to maintain the absolute value of EBITDA unchanged. This is our aim because the impact of ForEx on revenues is offset by the opposite impact that currencies have on costs. Our hedging policy, although starting from January, euro has appreciated visavishe dollar, and today, it amounts to EUR 1.24. This policy enables us to maintain our EBITDA 2018 expectations unchanged as far as the expected revenues are concerned given the further impact of ForEx that we have seen in the 1st month of the year, it is reasonable to expect slightly lower revenues at current exchange rates visavis what we thought in January. But with a subsequent increase in margins, if the EBITDA stays the same in absolute values, which is slightly higher than 10, 20 basis points improvement on an annual basis that we usually consider as ordinary. This is the end of my contribution. Thank you very much. And I give the floor back to Brunello. Thank you. So I'd like to talk about a pretty clear cut hopefully, God keeps helping us. And this is always very useful to have that kind of help, too. Summer collection the sales of winter collection, with the sales of our winter collection, and I have to say that it all went perfectly well. The buyers provided an excellent feedback, both in Florence for the men's collection in mid January and also in Milan last week during the women's fashion Week. So all the orders for the fallwinter collection have already been harvested. As you know, Dan, well, we are really keen on the feedback from the press too because sometimes their feedback is never does not match that of buyers. But really, the press really makes you understand whether your collection is modern, contemporary, young, youthful and exclusive. We feel that it is now a time that the brand our brand is enjoying this kind of feedback. It is pure, made in Italy, a product with a very high level of craftsmanship, especially in women. There are some couture oriented touches. For men, I would say it is a very Italian taste, but at the same time, it's very young, also in suits, contemporary, fresh, refined. Of course, we should not be the ones to tell you because it's not nice to boast about this, but this is what we believe. So we're very, very happy. And another important point, there is always the search for exclusive well made items when buyers come to our showroom. This is the first thing they ask from us before looking at the price list, before looking at the quality. So taste and then price last. Visual merchandising plays a very important role, and we have always been keen supporters of this. We think there is also a lot of attention on the way in which you actually make your products, how your products are made, where they're made, whether you have harmed or hurt or damaged the wildlife and the environment along the process. And this is very strongly perceived, especially by young people. There's no doubt. I'm always very firmly convinced that our team must be young. And this is true for all industry and sectors and politics included. I don't want to hide that the elections of Italy over the last couple of days clearly show that there's a need for a contemporary team in politics, too. In our companies, the average age is lower than 37 years, 43 for the management, but without me, there would be a very sharp drop. So what we would like to say, seriously, is that we can project for 2018 a healthy double digit growth, both in terms of revenues and EBITDA. And EBITDA should be slightly more than proportional. In 2018, we will invest more or less EUR 45,000,000. And as usual, if some special opportunity arises, we will try and seize it. So if we happen bumping to a store in a special location, we will be seizing this opportunity. At the end of the year, net financial position should amount should be close to 0, and we are particularly pleased with this. But as usual, we keep saying that the problem you see with this is any company is not debt, the level of debt, but to be able to design a modern product. In the future, around 40% dividend should amount to 40% of our profit. We should have equity net equity slightly more than half revenues. So we are confident for that. As for ForEx hedging, as Marino was saying, we have done this from the very beginning. Our company started its business in Germany, and we were basically cashing in Deutsche Marks. So the advantage was that of getting money, getting being financed in Deutsche Mark with a return rate of 22%, 23%. But despite that, we were fixing our exchange rates because we have always wanted to have an industrial pure profit because this is our business. For the 2019, 2020 2 year period, we envisage a healthy growth in line with the past years with EBITDA slightly higher than the growth of revenues. We would like to invest around EUR 80,000,000 EUR 90,000,000 EUR 120,000,000 EUR 130,000,000 over the 3 year period. And the net financial position should be positive and gradually improving. So to sum up, before moving on to the fascinating topic of the web, I'd like to say that true investments lie in seeking contemporary products on a daily basis. You see, we exchange ideas on taste changes. We try and we strive to be fascinating both in the way that we behave, the way we communicate and how we also behave in stores. We mentioned this at length in the November call. We try also to embrace change without any fear, accepting the fact that each and every one of us wants feel special. And I believe in this very much. And we know that every day, there will always be somebody posting a picture of you or even a selfie. So you can't possibly look the same today and tomorrow. But let's now talk about this fascinating theme of the web, the online world. We are very, very satisfied and pleased with how things are going. And also, we are happy with the way in which we have actually tackled and faced this challenge. On the one hand, communication is paramount. And when you actually log in to our website, you see the institutional part with our philosophy. Product is also very important and the way you present it, visual merchandising is essential. It's important for sales. And we are sure that online sales will improve. We don't know to what extent, but what we did want to do is to set up facilities that could possibly cater for large growth. So the real estate is there, facilities are there. This has always been a sort of obsession of mine. We try update our technology to use ultra sophisticated technologies. The investment is important. But I think that this world is changing so fast that we need to be up to date, and I like this very much. However, we keep implementing we keep implementing our grant policy of brand safeguard, and we discuss this topic with our partners and stakeholders because we are always fully convinced that the web, the online world, might massify one's image. And this is this applies to everybody. As usual, I devote 70% of my time to products, and it has always been the case from the very beginning. Of course, at the beginning, we were focusing on raising the capital, and new banks have been great with us. But if now you see 70%, I devote 70% of my time to product. And half of the remaining 30% is devoted to how the web is changing and how we can be recognizable, special and unique. You see this online world is complicated and what it means to me, it is also fascinating, and it is evolving very rapidly. A few days ago, we celebrated, we turned 40. And today, I'd like to I'd like our company and please listen carefully because this is the dream of my life that I'm about to communicate it to you. What I'd like to envisage for the future is for this company to stay headquartered in Solomeo for a few centuries through my daughters, granddaughters, grand grandchildren, maintaining the ownership, which does not mean that they need to manage and rule the company because I've always maintained that you do not inherit the way and the ability to manage a company. You inherit the ownership of a company. So the works to restore the parks are drawing to a close. We are also completing the works of the peripheries. I have always loved this art of preserving, and I've spent so much money. I've spent a fortune. And my father says, you must be crazy. And I'm so lucky to have my father still with me in his 90 it's always a pleasure to speak to him. Today, I think that we Because we want to respect all those who invest in our company. We think it is not fair that the listed company pays for this restoration. It is the private foundation that should pay for it. Because if I was an investor from San Francisco or somewhere else, I would say why doesn't your business help me support something or restore something in San Francisco? Why should I spend my money in Solomeo? Whereas all this restoration work is entrusted to the family foundation, hopefully, for a few centuries. Jokefully, but not so much. I say, but be careful because after I'm dead, I'm going to come back and take a look how you are looking after all these assets. And if you don't do things properly, I will be haunting your knights. But you see, we need to envisage life in over the next 100, 200 years. So to come into a close before questions, Q and A, we are very happy with business. We are full of gratitude towards mankind and towards you who have shared and agreed with our corporate culture. You have paid tribute to us. And maybe you have also paid tribute to my wonderful country, which is Italy. So endless thanks for everything. If you need us, just give us a call. Do not hesitate and come and visit. And now let's open the floor for questions. Thank you. Thank you very much. Chorus Call operator speaking. Now we will start the Q and A session. The first question from the Italian channel by Francesca Di Pasquantonio, Deutsche Hello, Brunelon. Good evening. Hi, Francesca. How are you? Yes, numbers speak for themselves. I bet that you are satisfied. I wanted to ask a couple of questions on your presence on the web, your online presence, the way in which you're managing your brand safeguarding And how you relate to the e tailers world platforms like Farfetch, Metchez, Net A Pote? What kind of agreements or what kind of constraints do you pose on them? And how can you maintain consistency with your online presence? 2nd question, what about the social media and your engagement there? Are you following this communication channel too because it is ever increasingly important? Yes, thank you for your interesting questions, Francesca. Obviously, I'm very, very pleased with your words, your kind words. I have to say that I think that, as I said before, the online world massifies your product. So we enjoy a great relationship with Neta Potemispota and the small but not so small Mai Theresa in the German market. And I think they are 1 of 3 of the best multi brand stores in the world. Multi brand means they buy the goods. Together, we decide how to display it and what to publish. It is a good relationship. This is the kind of care and attention that we devote. So for the time being, we have our products displayed in these 3 online multi brand stores. Well, we are online definitely, but we want to always strike a balance and find a kind of fair amount of online presence. I think that many of us are overwhelmed with documents and emails and stuff and communication. So we try not to do the same because if we hassle you, you will stop buying the brand. And this is the kind of grace that we apply when we in our boutiques. And also the online.comstore that is based in Solomeo, we kind of pursue this human privacy. That's what we are looking for, the respect for the human sphere, the private sphere. I think that we really are pushed and hustle too much online. So and as far as Farfetch is concerned, I know that it's not nice to express ill judgments. But I think that it is just and it's a pure marketplace. So we I insist on this once again. We live in we operate in luxury. Items are very, very expensive. So I think there should be a very clear cut distinction between luxury and this so called democratic luxury, ever accessible luxury. And you see this world didn't even exist up to 20 years ago. So we keep pursuing a project that envisages absolute made in Italy luxury, extreme craftsmanship, costly, a bit expensive. But I think that Europe has a great chance here, not just for ready to wear, but also for furniture, for example. A few days ago, I was wearing a particularly well known watch, not too expensive. But then once I suddenly received a group mail that was not tailor made for me and what I did was I changed my wristwatch. What I mean by that is that I want to keep supporting the exclusivity of products. Otherwise, it doesn't make any sense for us to manufacture in Italy with all the level of detail that we apply. I don't know whether I was clear in what I said. As far as social media are concerned, we try and use them in a normal manner. We post something every 10 or 12 days, a special picture, for example, during PT or during the Fashion Week. But I think we have a fair balance and grace there because I might say that the true luxury of the future will be to lead a life that is concealed from our travel mate, that is the smartphone. And that's the kind of products I'm looking for. It's not easy to express one's view to voice an opinion on these topics, but this is the path that we want to keep pursuing. Enlightening and clear as usual. I don't know whether it was very clear. Well, it was for me. But you see, every day, we hold meetings on this. We asked all the minds of our company. We asked everyone to behave well on the web because this everything that we built in 40 years is at stake there. Can I have a follow-up question? Can I ask a follow-up question on store openings that you have in store for the next 2, 3 years, what kind of geographies are you considering or favoring for your opening plan? Well, the idea is still to open 3 to 5 stores a year, then extending expanding an existing one in main cities. For example, this year, we'll be opening Dubai, Las Vegas, China Mall in Beijing and Monte Carlo. A good repositioning will take place there. While the price is not very convenient there, but that's the way it is. And Moreno was mentioning the rents before that they dropped by 0.3%. Well, I think that in main cities, these are the rents to be accounted for in the future too. So we would like to open 3, 5, 4 stores in over the coming years, beautiful locations. We will try and refurbish the existing ones too to keep them modern and contemporary and also looking for special staff because I think that we are all overwhelmed with newsletters and emails. We don't want that. Thank you very much. The next question is from Flavio Chereta, Jefferies. Good evening, ladies and gentlemen, good evening, Brunello. Buonasera, good evening, Flavio. Francesca touched upon 2 key topics. I'd like to ask the following opening openings. Considering the CapEx for the next 3 years, where will the CapEx focus considering that the openings are not that many? Secondly, maybe this is a question for Moreno, so we make sure that he's still there. No, no, we are all here. There's 8 of us. There's 8 of us. When we take a look at the net working capital and which had been considering a weakness of yours, it's now becoming a strength. The numbers that we are seeing now for 2017, is this the baseline scenario for the next few years, meaning all the actions that you have to take, have they been completed? So I'll start by answering. Yes, the next 2, 3 years CapEx are well, commercial CapEx because we want our showroom to be beautiful and modern because there are no investments in the headquarters or real estate, whereas in 2020, we might have to think about the next 5 years and to expand our headquarters and facilities. You see, for example, in Monte Carlo, we are just expanding the store, but the locations are very expensive. That's why you need all these CapEx. But what do we do about this? Well, today, we have EUR 4,000,000,000 human beings and from the East to Malaysia. So and that accounts for 12% of our revenues. And we think that on the Far East, there will be quite a good growth there, whereas 85% of our business now is generated in beautiful America and Europe, and we're very pleased with that. But the way the product is perceived in Europe and America is very important because all these faraway countries, they want to take a look at how the product is appreciated in Italy. I'd like to add, technically speaking, Flavio, the CFO speaking, I'd like to add the following. Of course, we must and need to renovate constantly renovate and refurbish our locations. We have 94 of them and franchised stores too and that's doing store in department. So we have to keep refurbishing them on a constant basis. Then we have some repositioning, relocation and expansion. And of course, we prefer the latter to the new openings because as we said it many, many times, they would dilute our presence. So we are and over the next 3 years, we want to focus on high quality relocation and expansion of existing footage. Talking about inventory, we have reached a standard level of critical mass of our management. So we can definitely optimize what in the past prompted in line with growth in line with the business growth. Today, we have a significant critical mass whereby in the next 3 years, we will be saving, and we are very pleased with these developments because that benefits the net financial position too. Flavio, for the 1,000 time, I'd like to go back to this. A showroom where you present your collection, but you failed to paint it or to refurbish it, well, your collection does not look as contemporary as if you had refurbished it. So you change the table, you change the fittings and the furnishing. I always dread that your product ages in an old place. When we start designing the collection, every 6 months, we change something, a picture, an armchair, a table, just tiny tweaks and changes. You see today, the research team for the men's collection came back, And they were very, very enthusiastic. They are designing new things. They are prepared, putting together some pictures and images. But it is a costly activity that traveling for the research team. But that's the modernity we were talking about before. Thank you. Goodbye. Thank you, Flavio. Congratulations on your Milan Flavio. Tonight, we have the JUVENTUS. I'm not sure that the foreigners are interested in this, but I wanted to say it. Next question from Paola Carboni, Equita Good evening, everybody. Good evening, Brunello. Good evening, Paola. I have a question on the competitive scenario, although I think you are beyond any competition, if I dare say. But I would say that brands have attempted something following your IPO, for example, Farron Coneri or Fabiana Filippi, and I was a bit concerned at the beginning. But I would say that the gap has widened even more over the last few years, not just in terms of volume, but brand perception to wealth of offering collections and style proposition. I wanted to take one your comment on this or whether I'm wrong and there are other brands that you are consider your competitors that you monitor. Well, somebody was saying to me tonight, are you worried when you are being copied? And well, honestly speaking, if you're not being copied, it means that the brand is not successful. And you see, it's always been the case since when I was young, only special brands are copied and counter fitted. What I say is that we might help each other out. Of course, we have made a precise choice of manufacturing in Italy with a specific rate of craftsmanship, and I'm not talking about taste here. And we wanted to be positioned in a specific we wanted to have a specific position. But it's not because we are snobs that we think so. But see, I always focus on very high quality and modernity of the brand because there is not that much supply of daywear in the world and there is a demand for that. But you see, women need to change all their wardrobe every 6 months and men, too. Do you remember when at the beginning, we were talking about these evergreen items, and we will say that we have no evergreen. But you see because, for example, the men's jacket, the length might differ by a couple of centimeters. You might think it's the same, but it's not because if you wear last year's jacket and the it looks old older than this year's, although the tweaks are very, very small. But we want to keep pursuing very high quality. If you ask what I'm worried on a daily basis is the rate of modernity of byproduct. So since we have already discussed about strategy, I have 2 financial questions. Talking about inventory and its performance in 2017. The objective of a net financial position close to breakeven in 2018 implies that the net working capital generates some further cash in 2018. So we can expect a further improvement of its incidence on sales. Or am I wrong in my reasoning? No, Paola. That's precisely the case. We expect a further yet small benefit also from the net working capital in addition to that coming from the income statement. And I want to add something more in a jokeful manner, Paola. We should not worry about cash too much. We should worry about investing and investing so that your brand keeps young and innovative. Because sometimes when you have high debt, of course, you are scared by it. But at these in this kind of under these circumstances, we should not worry about the EUR 35,000,000. We should worry about investing in a modern brand. I don't want to be a snob here, but when we discussed this topic with you many, many times, we spoke about cash many, many times. So when your company has too much cash, maybe it's not a healthy one. Andrea Guerra used to say, even in best times, companies should invest to stay contemporary. And this since then, I've always shared this view. I think we need to be modern. Therefore, we need to invest. One last point. As far as hedging is concerned, if I understood properly, we should expect the 2018 margin that improves beyond the usual 10, 20 bps. I don't know whether we can can we say whether in 2019 this effect is absorbed? And in 2019, should we expect a flat margin? Or what will the development be? First of all, the additional benefit visavis the 10.15 ordinary basis points can be an additional 10.15 as an effect of ForEx whereby our revenues at current exchange rate will be lower than at constant exchange rates. And as I tried to explain before, what we expect is for the absolute value expected at constant exchange range of revenues. We think that we can manage to do that because all the hedging has been done, as I said before. But a slightly smaller chunk of current exchange rates rather than constant exchange of revenues, maintaining the EBITDA stable vis a vis our expectation. That's where the 10, 15 additional basis points are come from. It is then clear that once revenues go back to normal, so when a cost and exchange rates are the same, the current exchange rate, the phenomenon might dwindle. But we think that there will always be 10, 15 points in benefit because of what I said before. Brunello speaking. So under normal circumstances, we well, you see, we believe that we might have some benefits in terms of income or profit. Next question from the English call, Berenberg, Mariana Holt. Hi, good afternoon. This is Mariana Horn from Berenberg. Thank you for taking my questions. I have 2, please. The first one is on like for like performance and the expectations for the rest of the year. So you had a nice 4% performance so far in 2018. And I was wondering whether we could assume this for the remaining of the year and if you could share the performance of like for like region to region? And the second one is on different consumer clusters and different trends that you might have seen. So can you discuss how the domestic versus the touristic clusters have performed, especially in Q4 and maybe in the past weeks as you disclosed like for like? And also if you could share or if you have seen any specific trend that you think may have stood out and you found interesting. Thank you. So let's start from customers. Well, this it's now been a year or so that we are now once again talking about local customers. And this is very, very interesting, especially for Europe. So customers shop from the local stores and they are local customers. As far as the like for like is concerned, well, the important thing is to express a judgment at the end of the half year because that's the right way to find out whether your collection has performed well or not. We have always maintained that the year like for like of 4%. We have always maintained that this is an interesting and appealing figure. It would be interesting to maintain it over the years because if you have too high of a like for like, it could be a bit dangerous for the years to come. So it is true that our product, you see, since it has it is a no logo product, is not typically seasoned. So we would be pleased with that. I have to say that this like for like is somehow increasing and improving everywhere. And I think that there is a positive development there, better for women, a bit tougher for men, men's collection because you see men need to be shown something very, very interesting in order to make the purchase. You see women tend to change their wardrobe every 6 months, whereas men tend to add 2 existing items. We are experiencing a good time for menswear because we are the reference point for men's. We are chic contemporary kind of menswear, definitely not Superfashion. So generally speaking, there's a lot of positivity. This should be said. We should make a great distinction between recognizable luxury and expensive products on the one hand. And on the other hand, there will be products increasingly industrially made and with a lower price. That's for sure. And this is what we are trying to do. When we say that we want to protect our brand online, we want to pursue the first path because this is the great thing for us. But in general, I would say, you see, the first question by our buyers is we want an exclusive product, which means that probably there is too much of a wider distribution. And as far as the like region by region like for like question is concerned, in the first 2 months, this 4% is pretty homogeneous across the regions. There are no disalignments between or mismatches between one region and the other. Yes, I could confirm that. Thank you. Are you happy with your with the answer, Marianne? Yes, yes. Thank you very much. Mr. Cucinelli, there are no further questions for the time being. Well, thank you very much for all the esteem that you have displayed. We are particularly confident tomorrow, the new men's collection we will start designing the new men's collection. But generally speaking, we would like to say that there's a good atmosphere in our company, and we would like to once again say that we really work with Serenti. Thank you very much for everything. Carusco operator speaking.