Ladies and gentlemen, thank you for standing by, and welcome to the earnings call for Samsonite first half 2018 results conference call. At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question and answer session. At which time, if you wish to ask a question, you will need to press star one on your telephone. I must advise you that this conference is being recorded today, Wednesday, 29th of August, 2018. I would like to hand the conference over to your first speaker today, Mr. William Yue. Thank you. Please go ahead, sir.
Thank you, operator. Thank you everyone for joining the earnings call today. We're very pleased to have our chairman, Mr. Tim Parker, and our CEO, Mr. Kyle Gendreau with us to go through our first half results. Without further ado, we will begin the presentation. Will Tim make some opening remarks, and then Kyle to take over. Thank you.
Okay. Thank you very much indeed, William, and a very good evening to everyone from Hong Kong. We are very pleased and proud to present another set of record first half results for the company. In fact, the first half of this year has been very encouraging from a number of perspectives. We've had a bit of a following wind from currency. The headline growth figure of 16.6% is reflective of an underlying 12.9% constant currency growth. If we strip out the effects of the acquisition of eBags, so we're getting a period where we didn't own eBags, the underlying organic growth rate of the business was 9.9%. I think at all levels, a very encouraging performance in nearly every territory, as Kyle will explain in a moment. Some good progress with the growth margin as well, up 18.9%, 15% in constant currency.
That reflected in part, the further excellent progress that we are making with improving the growth margins at Tumi. That's partly around pricing and partly around our sourcing initiatives. The combined impact of all of that has been to move the EBITDA up by 14.5%, 11% in constant currency terms. Were it not for the impact of eBags, and eBags, as I'm sure most of you will recall, is a business that we acquired with very little profitability, with a view to improving significantly, the return in that business. That business, of course, in the short term, has had a dilutive effect. If we exclude eBags, then our EBITDA margin would have moved ahead 10 basis points. Of course, underlying all of that, our adjusted net income has moved up 19.5%. That in part reflects the increase in EBITDA.
Also, the excellent improvement that we have made in our financing costs. Interest expense was down, and that contributed again to a very healthy improvement from $100.2 million to $119.8 million. Next slide please, William. I thought it would be just worth reminding people of the record of the business over the last five years. We're just waiting for the slide to change. Bear with me, everybody. Could we move to the next slide, please?
It takes a little bit.
Okay, good. Moving to the next slide, I thought it would be worth reminding us all of the five-year performance of the group. You can see here that our underlying growth over the last five years in organic terms has been 9.4%. Obviously, if we add acquisitions, that's increased very substantially to 17.1%. I think it's worth pausing just to reflect on the fact that the results of the business have been driven mainly through the increased performance of our core brands, and that the company operates in a market which has very good structural characteristics. Our brands, which are the leading brands in the market, have been able to participate in what's been a very healthy growth of tourism and travel over the last few years and is projected in the future.
Of course, the impact that that has generally on luggage, business bags and casual bags. Kyle, it's worth looking at the model for our business and the next slide, please.
Okay, everyone. Thanks for joining the call. I'm on slide six, this page I think does a very good job of capturing what we're working on in the business and what successes we've had. I'm on slide six. I don't think it's changed yet, but it will change very quickly. If I think about strong constant currency sales growth across all regions, if you look at the top right, North America was up 12.4%. That obviously had eBags in that, but if I adjust for eBags, that core North America business was up 5.1%. Asia up 14.4%, Europe 11.4%, and Latin America 17% growth. Very strong double-digit growth across all of our regions. When we look at our brands, all of our brands are performing very well. Our core kind of historic brand, Samsonite, which is well penetrated at 5% growth.
Tumi, which is really starting to take stride in Asia and Europe and performed very well in North America, up 16.6%. American Tourister, as we know, we're pushing with the Ronaldo campaign and some terrific new products, was up 24%, and other brands equally up across the business. We saw very good growth in our key categories. Our travel category, which is our historical strength, is up 10.8%. As you'd expect with the initiatives, non-travel is growing faster, so 16.3%. You'll see business casual and accessories all growing at a very healthy clip. When we think about our channel strategy, we've been, as we've messaged in the past, very focused on our direct-to-consumer business. You'll see that our direct-to-consumer business with retail sales is up 25.7% overall, with retail up 14.4%.
Our direct-to-consumer e-commerce up 74%, which has the partial impact of eBags. If I adjust that out, our direct-to-consumer e-commerce is up 25.7%. We think about our overall e-commerce business, which is our direct-to-consumer plus our wholesale e-retailers, that had moved up from 10.5% in the first half of last year to 14.1%. Up 360 basis points, as we're very focused on driving both our online direct-to-consumer and online wholesale customers. We continue to invest behind the business in advertising. It was about the same rate of sales, but up around 14.9% at 6.2% of sales. We are investing across all brands, and in particular, we've stepped up the Tumi advertising spend. As we've now penetrated into Asia and Europe, our Tumi advertising is around 6.6%.
American Tourister, we've invested as well to deliver the growth in American Tourister we've seen this past year. Central to all this is the business's ability to generate operating cash flow. We look at the first half this year, it's a little lower than where we were last year. We generated $56 million this year versus $152 million last year, and that was in part due to some decisions to increase our working capital ahead of the summer selling season and our push across the business. If you recall, last year was unusually high because our working capital was a little bit lower. You have the swing because of that, and I'll go through that more later in the deck. On slide seven, I thought it'd be helpful just to give you the building blocks of the growth so you can see it.
We've gone from $1.586 billion to $1.850 billion. Our core business, this is core business excluding Tumi and excluding eBags, was up 8.4%, with Asia up in the core 10.5%, North America 4.1%, Europe was up 11.7%, and Latin America up 15.9%. This is core business excluding Tumi, which is really a terrific result. Each of these regions are really executing. It's a mix of American Tourister strategy along with just general growth across all of our brands. The Tumi business added $49 million in sales first half to first half. You can see by region, very strong growth with the core North America business up 8.2%. Slightly ahead, we had a very strong first half with Tumi North America. Our own models had North America growing 6%-7%, so we're outperforming in North America.
Asia up 39%, a little bit of help from the distributor buybacks, but if I adjust for that, Asia's up close to 32%, really strong Tumi growth. In Europe, where we finished the last bits of integrating the Tumi business into our European business at the beginning of this year, is up 9.2%, and my expectations is the back half and into next year will be much higher for Tumi Europe now that we're fully integrated there. As Tim said earlier, we had some currency translation, which added to the last bit of growth in the business. Really delivering on all cylinders when I look about where the growth was coming from. Lastly, you have the eBags, just the extra four months of eBags here on the chart. If I move by region, just to quickly walk you through regions.
Again, North America increased 12.4%, 5.1% if I exclude eBags, and the EBITDA margins are up in North America as well. When we look at the breakdown of the North America business, our wholesale business was up 2.3%. Our direct-to-consumer sales was up 31% and 10% if I exclude eBags, you get the underlying growth. Our e-commerce business, as you'd expect, was up high with eBags at 98%. If I take that out, very strong e-commerce growth in our core business, 13.3%. Retail net sales up 9.6% with a very strong retail same-store comp at 5.2% for the first half. We added 12 new stores in 2017, so you get the full year effect of those, and then four stores in the first half of 2018. All of that fueling a very good growth story for North America.
All of our key brands are growing very nicely. Samsonite in North America, as you recall, is very well penetrated. For a long time, it was the only brand we were operating in North America, up 4%. Tumi net sales of 8.2%. American Tourister, where we start to get some inroads into pushing the American Tourister strategy on North America, are up 12%, and I think there's much more to go in North America with the American Tourister strategy. Our other brands are up 36%. Some of that's around the eBags noise, and we have some other brands that we sell through that eBags platform, which we caught in other brands.
From a category perspective, travel up 7.6%. Non-travel growth of 19.7% is partly due to the impacts of eBags, which added more in the business casual and accessories, particularly area where eBags are selling other brands that fit into those categories. Last year, EBITDA margins are up 50 basis points. If I exclude eBags, which was slightly dilutive to gross or EBITDA margin, North America would be up 160 basis points for the half. We saw terrific growth in Asia, 14.4%, led by markets of Hong Kong, China, Japan, India, and generally across the market, all countries delivering very good growth. The wholesale channel was up 10.3%. The growth in direct-to-consumer was up 32%. Part of that is to do with the distributor buybacks.
When I look at e-commerce, up 40% for the Asia business in the first half. Retail growth again was up because of some of the new stores we took back through these distributor buybacks. Our comp store growth up 10% for Asia. We added 54 stores in 2017, and we added nine new stores in the first half of 2018. Really strong growth across both channels within Asia. By brand, we saw our core Samsonite up 3.9%. Tumi, as I said earlier, up 39%, and if I adjust for the buybacks, up 32% or 31.7%. Really terrific growth in Tumi, and we're really getting into stride here. You'll see us continue to drive terrific growth in Asia with Tumi. Net sales of American Tourister up 17.7%.
If you recall, if we go back two years in Asia, American Tourister had ended up close to flat. We now have American Tourister moving with some very good advertising with the Ronaldo campaign, also some really terrific new product in American Tourister that's fueling very nice growth. Other brands up 19%. Kamiliant, which is this very entry-level brand, up 57%. The brand High Sierra we're using in certain markets in an entry level kind of way up 35%. Travel's up 13.7% and non-travel, as you'd expect, up a little bit higher, 15%, with business particularly up 24% and accessories up 30%. Our EBITDA margin was largely flat in Asia. That is with a 30% increase in advertising. As Tumi got moving, we stepped up some of the advertising in Asia.
EBITDA margin largely flat, with 30 basis points up in advertising expense. If I move to Europe, we had a terrific set of results in Europe. This business was up $67 million or 11.4%. We had very strong American Tourister growth at 49%. We're into, I would say, year three of a really solid push for American Tourister. That fueled with the Ronaldo campaign has really helped drive terrific growth within that brand. Our wholesale channel is up 11%, a lot of that to do with American Tourister, which is sold through some of these wholesale channels. Our direct-to-consumer business was up 12%, with retail sales up 10.4%. We had a very good comp of 3.8%. We added 32 stores in 2017, and we added 28 stores in the first half of 2018.
Our e-commerce business, which we now have moving very nicely in Europe, up 26.6%. If I go by brand, our Samsonite sales up 5.5%. Tumi, as we said earlier, up 9.2%, and really picking up momentum as we move into the second half. American Tourister, 49%. By category, travel is up 10.5% and non-travel is a familiar trend across all of our businesses, where travel's strong, and as you'd expect, our non-travel growing faster. In Europe, that was up 13.5%. Our EBITDA margins in Europe were largely flat. We saw some gross margin improvement, part to do with the Tumi mix and general growth in our direct-to-consumer business. Some of that was offset by the increase in SG&A expenses tied to the store openings that we've had in Europe as we pushed that.
I'd expect Europe to start to deliver some leverage as we move into the back half of this year, and more particularly as we move into 2019 on the EBITDA margin side. Latin America is a market that continues to grow. I would say mid to upper teens growth. We had 17% constant currency growth. It was led by Mexico, Brazil, and Argentina, which had very strong six months. We've seen a little bit of softness in Chile, and I'll cover that in a second. But if we look at our wholesale business for Latin America, up 18%. Our retail or direct-to-consumer business was up 15.4%. Retail net sales growth 13.4% off of a comp of 0.6%, with 11 new stores opened in the first half of 2018, and we opened 29 stores in 2017.
If I exclude Chile, which we've seen some pressures within that marketplace, our same-store comp was up 16%, which is really being driven by great success in Brazil and Mexico on the retail front. Our Samsonite brand in Latin America up 18.9%, and American Tourister off the back of Ronaldo came more than doubled to 10.8%. So off of a small base, but really starting to move very nicely in our Latin America business. In our other brands, the growth was around 2.1%. If you remember in Chile, we operate some other brands, particularly Saxoline , Xtrem, and Secrid. Our Chile market has seen a little bit of pressure, particularly off of two things. One, consumer sentiment's a bit off. There's been some currency movement within Chile, but also Argentina as a market has opened up again.
Argentines which would've been shopping in Chile are back to shopping, and they're in our core business in Argentina off a small base is up 168%. So we've seen some shifting in where consumers are buying in Latin America. Travel is way up 20%. Our non-travel was around 14%, and that's really a little lower than travel because of what we were seeing in Chile where the Secrid brand, for example, which is a women's handbag business, is growing at a slower pace than the travel business. Adjusted EBITDA margin largely flat, slightly down. That's really around kind of laying the footprint for retail in Brazil particularly, and slightly lower advertising across that business. And slightly lower gross margin as the mix of the business shifts a little bit. So we've seen American Tourister growing faster, that has a little bit lower gross margin.
In Brazil, where we're driving and pushing that market, we are pushing with a little bit more promotion to drive the growth in that market, which puts a little pressure on gross margins. We look at by country. Across all of our countries, we've seen very good growth. I won't read across the page. I might just point out that Germany looks a little funny at -18%, but there's a footnote for this, has more to do with shifting of where we're booking some of our Tumi sales and also some of our e-commerce sales, which will make Germany look like it's degrowing. If we adjust for that, Germany has a bit of growth.
If we look at our combined growth in our emerging markets as we define them, we continue to have a really strong run there, 27.8% growth in emerging markets in big markets like Russia, Brazil, Turkey, all doing really well. You can read across the page, every one of our emerging markets are growing as you'd expect them to be. If I move to slide 14, I've covered this already, but I'll just kind of point out a few extra points. Our direct-to-consumer sales are growing as a proportion of sales for the first half of 2018 at 33.6% versus 30.2%, up 340 basis points. eBags helps a bit with that. Our direct-to-consumer business was up 25%, as I said earlier. We saw a terrific growth in retail, so our net retail growth across the business up 14%. Our combined same-store comp is 5.4%.
In the first half combined, we added 52 stores of 2018 and 127 stores in full year 2017, including the 30 from the Tumi distributor buybacks. As of June, the business operated 1,219 stores, of which 283 of those stores are Tumi. Our direct-to-consumer e-commerce, really strong performance, up 74% with eBags, but take eBags up 26%. This is a pace that you should expect to continue from us as we really focus on driving our direct-to-consumer e-commerce business. As I said earlier, the blended mix of our business, wholesale and retail or sales to e-retailers and around direct-to-consumer shifted to 14% of sales from 10.5% last year, first half. If we go by brands, you've got a sense for this as I was going through the regions, but our core brand, Samsonite.
These are all of our core brands, but Samsonite brand up 5%, and reported up 8.9%. Tumi up 16.4%, American Tourister 24%. What we've grouped in as other brands, which are brands like Speck and High Sierra, Kamiliant, those were up 22%, just under 22%. Really strong growth across all the brands in our portfolio as we deploy our multi-brand strategy across the business. On slide 16, I tried to capture here for you Tumi, so you can get a sense for Tumi all in one place by region. As I said earlier, North America, really strong growth of 8.2%, slightly ahead of our own expectations. The business is really being driven by very strong e-commerce growth, up 18.4% for Tumi, and the retail business up 8.4% with same store comps +3.2%.
For Tumi in 2017, we added 7 new stores. We added 4 stores in the first half of 2018. This is just in North America. The wholesale channel increased by 3.6%. A little slower wholesale growth in North America for Tumi. You'll see the same thing in the second half as we've stopped some shipments to distributors that we're actually selling into Asia and Europe. As we've now got our foot on the ground in Asia and Europe, we wanted to stop some of the leakage of products being sold from North America into these other regions. That will put a little bit of a strain on the wholesale growth within Tumi North America. We've seen very strong gross margin movement in Tumi North America, up 370 basis points.
We're getting pretty close to the 70% target that we have in mind for that region. I'd expect as we move into 2019, we should be very close to that 70% margin. When you think about the retail wholesale mix of this business, that's a natural place for the Tumi gross margin. Our Asia business up 39%. Again, if I adjust for the buybacks, it's up roughly 32%. We've seen really strong growth in all of our channels here with retail up 76%, e-commerce up 211%, and wholesale up 23%. We had a very strong same-store comp for Asia, 11% growth. Same store, we added 4 stores in the first half of 2018. We had 38 last year, of which 30 were from the distributor buyback.
We continue to penetrate. I expect this pace to pick up now that we're pushing both in Asia and Europe the Tumi strategy. The gross margin for Asia up dramatically, 1,100 basis points from 62.8% to 73.8%. That has a big piece to do with the distributor buyback. We've shifted from wholesale to directly operated margins for a big portion of those. On top of that, some of the synergies around sourcing are benefiting the margins as well. In Europe, we had 9.2% growth, a little bit lower than the other regions, but we are still integrating Tumi within Europe. We were kind of shifting the brand ownership and responsibility for Europe across each of the countries. We've seen 9.2% growth, retail and e-commerce up 14% and 17%.
We added 9 new stores in the first half of 2018, so we're really starting to push Tumi within the region. We had 7 stores added in all of 2017. You can see the pace within Europe is picking up. We've seen a same-store comp that was slightly down. Some of this is around some cannibalization as we open stores. You end up with markets that have more than one store. Then the calculation of same-store comp, it'll put a little pressure on that number. We've also seen some, in a few pockets, Asian tourists down. The brand as presented in Europe historically was largely catering to travelers. As we position that brand to be more of a brand within market, we'll see much stronger growth.
I anticipate the second half for Tumi in Europe to be very strong, double-digit growth for Tumi in Europe. We've seen gross margin improvement, just like the other regions, as we shift from some distributor and some wholesale markets to more direct-to-consumer. 800 basis point improvement in gross margin. We normally have a bunch of slides with product pictures. I've kind of narrowed that down to just a handful of pictures to give you some flair for some of the things we're working on that are exciting from a product perspective. We have the Samsonite Eco-Glide, which is a 100% recycled bag that we've had very good traction in North America. It's been picked up in Europe and Asia under different names. Really a terrific product.
I personally bought nine of them to give to all my nephews to try out, and it's a wonderful product, and I think worth looking at. This American Tourister Curio or Soundbox, this was the headline of the Ronaldo campaign. This is a terrific American Tourister product doing well in all markets that we've presented it. In the U.S., we've added a Kevlar Samsonite backpack at a very interesting price point for the North America business, and it's doing very well, very well received. I think probably the biggest kind of change from a product perspective is this Tumi Latitude, which is on the right side of the page. This is the first Tumi product using the technology that Samsonite had as far as producing really lightweight, hard-side luggage that the Tumi brand has needed, and the early reception of this has been tremendous.
I'd highly recommend you go check that out in stores. It's now fully penetrated around the globe and I think a wonderful product that I'm using myself. I put here a Lipault bag, which is a bit of a woman's first strategy. In Lipault, we are pushing in select markets in Europe to get that moving in the right direction. From an advertising spend perspective, we're up 14.8% or 14.9%. It's about the same % year-over-year. At 6.2% last year or 6.3%, you can see by region it's fairly consistent. It's down just a bit in Europe as American Tourister has got into stride, so it starts to, in Europe, look like the rest of our regions.
Up just a bit in Asia as we start to spend a little extra on Tumi advertising, particularly in Asia, where we are off and running with driving Tumi in that region. This on slide 19, just some of the pictures of the Ronaldo campaign. Again, this campaign really did great things for both Europe, Asia, and Latin America. A little lesser extent in North America, where I'd call it soccer isn't as prevalent. We saw 24% growth in our American Tourister business off of this Ronaldo campaign. Now I'm on slide 20. I'm not sure the pages have changed yet, but I'll put my interim CFO hat on. These are typically the slides where I highlight some of the financial highlights. We've covered some of it, but I'll repeat. Our core business, when we think about constant currency growth, up 13%.
If I take eBags up just under 10%, 9.9% growth in our business. As we said, Tumi grew 16%, and if I exclude Tumi, our growth was 12.1%. Really terrific growth story, as I've said, across all of our avenues for driving sales growth. Adjusted net income was up 19.5%. We had strong adjusted EBITDA growth of 14.6% growth as well. Operating cash flow, a little lower than where we were last year, $56 million versus $152 million, largely off the back of working capital, which ended up with a little over $100 million investment when we think about first half 2018 versus 2017. In 2017, we had an inflow. This year we have an outflow. I'll cover working capital in a second. The working capital efficiency was 14%. It's still in line with our targets, but slightly higher than the levels we've been running ahead of this.
A lot of this was around having product leading into the summer selling season and also with the American Tourister campaigns, making sure we had the right product. You'll see by the end of the year, this will balance back down to a working capital level that's more consistent with where we were at the end of last year. We completed a refinancing in April, so we covered it off the quarter, but we closed in April of this year. I think this was a great refinancing where we're able to lower the interest expense for the business on an annual basis, approximately $9 million. Extended the maturity, we're able to capitalize on effectively improved terms across all of our credit facility.
We're able to tap into the European market with a Euro bond, which is really attractive pricing, and also lines up some cash flows from just the natural cash flow hedge against our debt facility. Our leverage ratio is at 2.57. If you recall, at the time of the Tumi closing, we were roughly three times. We continue to deleverage, and I think we'll see more by the end of the year. Our leverage ratio is coming into the 2.3 or thereabouts range at the end of 2018. Capital expenditure is $41 million, largely focused on driving this direct to consumer and a bit of investment in industry product development, and I'll cover that in a second as well. Our tax rate was up slightly, 28.35% versus 24.3% in the half of last year.
A lot of that has to do with the accounting for share-based compensation and as we saw our share price come down at the end of June, that'll impact the deferred tax carrying, which drove the rate up just a bit. Our full-year expectation for the tax rate is in line with where we were last year, maybe a shade lower at around 26%-27% effective tax rate for the business. From a cash distribution perspective, in July, we paid out a cash distribution of $110 million. That was up around 14% or 13.4% to the previous year.
When you look at our reported balance sheet and we think about profit to equity holders, I thought this graph would be helpful for people to understand the one-time impact of the debt refinance, where we wrote off the deferred financing cost from the original debt issuance when we did the Tumi deal. If I look at our core growth and our profit to equity holders, we saw growth in net income. We also had lower acquisition costs, our profit to shareholders before the write-off of the deferred was up 28.8%. You can see here, if I put in that deferred net of tax, our reported profit to shareholders is slightly down.
That underlying growth of 28.8% is how we're viewing the growth in our profit to shareholders, that's part of the reason why adjusted net income is up close to 20% as well, because that will adjust that out as well. From a balance sheet perspective, we've largely covered this debt, reduced $20 million. The leverage continues to come down 2.57 times on the leverage, we have $603 million available under our revolver in the revised credit facility. If I move to working capital, really here is where you can see that we've invested a bit into inventory. When we look at June of this year to June of last year, we're up to 140 days of inventory versus 124 last year. I would argue last year was slightly low, and this year was slightly high.
I think we'll end up somewhere around 125 to 130 days. I'm hopeful by the end of the year we'll be in that zone. It was really around this kind of anticipated step-up in the Ronaldo campaign and summer selling for the business. There's a little bit of timing of payables, that usually normalizes out in the full year view from the working capital perspective. From a CapEx perspective, again, a large part of this, as you'd expect, is going to our direct-to-consumer push. It's not a significant spend when you look at it. The first half, $22.6 million, where we're selectively opening retail and markets where it makes sense. We continue to invest in product development, R&D, and supply. That was $8.7 million.
We had a bit extra in the IT side as we shifted one of the Tumi offices, which had some IT spending, and we also put in some tax software for managing our tax provision, which added a little bit in the information technology side. If I just conclude on strategy, when I think about the business, I'm sitting in a different seat, I've been actively involved in this business for many years, as you know. Our strategy is largely intact. We have the benefit of operating in an industry that has terrific growth profiles. International tourist arrivals, which we think is a pretty good measure, is up 6%. That's even higher than what was forecasted at around 4% to 5%. You can see across regions, that growth is very strong.
We continue to drive what I would say a well-diversified multi-brand, multi-category, and multi-channel strategy across multiple price points now that we filled in Tumi and we're executing very well with American Tourister. That multi-pronged strategy will deliver terrific growth for us. We continue to focus on direct-to-consumer as we covered, and you can see the results of that. We see it's a natural transition for our business like many businesses, but we are embracing and driving the business towards driving this direct-to-consumer, and particularly direct-to-consumer e-commerce, and we're excited with what's to come there for us. We invest in our brands with advertising, and that will stay intact. You should expect us to spend around 6% on advertising. We're spending it across all of our brands, particularly focused on Tumi, Samsonite, and American Tourister, which are our key brands.
We have a terrific decentralized management structure with very strong regional presidents and regional and country-level teams that really do make a difference in driving the strategy of this business at a very local level with really understanding the markets and the channels and the way they advertise in these markets. Lastly, as you know, we continue to invest in R&D, and that will not change. We're working on lots of new initiatives, and as a team, we're always focused on really delivering true innovation to the marketplace. You'll find that strategy is largely intact, and it's delivering results as you've seen off the first half. With that very long-winded, no-pause presentation, I wanted to leave time for questions. If we can, William, we'll open it up for questions.
Yes, please. Operator, can we have the first question?
Sure, sir. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Please note there may be a short pause as the questions are being collated. We thank you for your patience. Our first question comes from the line of Chen Luo from Bank of America. Please ask your question.
Thank you. Hi, Tim, Kyle and William. This is Chen calling from Bank of America, Merrill Lynch. Congratulations on the solid result in first half. I've got three questions. On the North America side, we noticed that in Q2, there has been some slowdown. This compare against a very strong U.S. consumer market. I guess this may have something to do with Speck business, if we strip away Speck business, what was the underlying trend in Q2 for North America? The second question is, can you give us some most recent trading update, some color on Q3 so far? Thirdly, in terms of EBITDA margin, if my calculation is correct, in Q2, actually our adjusted EBITDA margin actually improved by maybe around 60 basis points. For the first half, because of the dip in Q1, the adjusted EBITDA margin was flattish.
Are we still sticking to our full year guidance of at least 50 basis points improvement for EBITDA margin? Thank you.
Okay. North America, I think we started off with a very strong Q1. When we generally look at our North America business, we think that it's a business, if I strip out the eBags noise, should grow around 4%-5%. We're quite happy with the growth. We did see some discount channels in the second quarter slow down on some buying. We also had a larger customer, Bon-Ton, that business went away. When you look at our wholesale business, it's up around 2%, whereas our direct-to-consumer business was up nicely. I think you have a little bit of shift in that kind of wholesale discounter channel that caused a little bit of strain in Q2. When I think about North America for the full year, I think we'll be in this kind of 4%-5% range.
You'll always have little pockets of kind of movement as customers buy in and out. What was the second question? I see I wrote it, I can't read my own writing.
Q3 trading.
Generally you see good momentum in the business. There is a little bit of what I would label macro uncertainty in the marketplace within certain pockets of the business. If we delivered double-digit growth for the first half, I think Q3 will probably be high single-digits. When I think about the full year, I think we'll still be in what I would label consolidated double-digit growth. There is some macro pressures in a few markets. We've seen a little bit of consumer sentiment changes in a market like China, where we had a really strong first half. We're now seeing what I would label kind of higher single-digit growth from a double-digit growth. Korea's become a little bit noisier as we go into the second half.
Korea is a market that I think we've talked about in the past, that's had its challenges with consumer sentiment and Chinese travelers. We were feeling optimistic in the first half with a little bit of positive growth in Korea. We've seen that have a little bit of strain as we lead into Q3. Past that, I think generally the business is performing well. Our Europe business continues this amazing trend. Just for color, we had the strongest month we've ever had in Europe in the month of July, just in total sales. A lot of the strategy in Europe is playing out very well. In Latin America, that core business is really performing well. Chile is still under a little bit of strain as we saw in the first half. We start to lapse that noise for Chile as we get into Q4.
I expect Latin America for the full year to still be in this kind of very solid high teens growth. Maybe a little bit of noise in Q3 ahead of leading into Q4. As far as EBITDA margin goes, my outlook as I sit today is I think we will deliver operating leverage. If I was to rebase my thinking, it's probably in the kind of 20-30 basis points. I think we were probably thinking closer to 50 basis points in the half. At the end of last year. I still think we'll deliver good operating leverage to the core business. If we exclude eBags , it was up 10 basis points, and I expect in the back half, which is typically stronger than the first half in our business, we'll be able to deliver some of that leverage.
I'd probably moderate from the 50 basis points that we were thinking at the end of last year. I'm still getting my arms around all the moving pieces of the business. As you know, I tend to be a little bit more conservative in my thinking, and that's where I would estimate we'd come in at this point.
Thank you.
Okay. Yep. Next question.
Our next question. Yes, sir. Our next question comes from the line of Anne Ling from Deutsche Bank. Please ask your question.
Hi, management team. I have one question regarding the GP margin. Just to check, for the first half, is it correct that for the GP margin for the Samsonite ex Tumi business, it's flat year on year? Most of the growth is coming out from Tumi. Should that be the case, how should we look at in the second half in terms of margin, given the fact that maybe some of the raw material prices have moved up? I would like to get a little bit of a guidance in terms of your price hike strategy as well as your margin assumption on the gross profit side. Thanks.
Yeah. For the first half, our core, what I would label our kind of pre-Tumi business, was about flat. You have two things going. You have direct-to-consumer that's growing very nicely. That will bring up our gross margin, but we also have American Tourister growing very well. That'll actually bring gross margin down. You have some mix effect in there, but the way I think about our core ex Tumi business is we should stay fairly consistent. We do see some cost pressures on the material side, but we also have currency that's in our favor in the back half as well. Our teams are pushing on both that and making sure we get the benefits of currency in our pricing. Our view is we should be able to maintain the gross margin for the back half.
We have kind of normal price increases baked into some of our business, but nothing unusual. For Tumi, we've seen a lot of this leverage that we're expecting in the core Tumi margin. We think there's just a bit more to go in North America, and that's a big piece of the currently. As that margin moves all the way up to, let's say, 70% or a run rate 70%, exiting 2018 will get a little bit more uptick from Tumi as well. When I think about margin for the back half of the year, I think it's going to stay fairly consistent with what you saw in the first half from an overall margin perspective. Maybe a shade higher for Tumi and maybe neutral to a shade lower on the core. Blended, we should be in this kind of 56.5% range for the full year.
Okay, thanks.
Our next question comes from the line of Erwan Rambourg from HSBC. Please ask your question.
Yeah. Hi, good morning or good evening, gentlemen. Two questions, please. It's nice to see some margin expansion in Q2. You just mentioned what you were expecting for the full year. I'm just wondering, it seems that margin at Tumi has been quite tremendous, but it's not the case for the other businesses. I'm just wondering how you think about operating leverage opportunities for ex-Tumi. Not this year, obviously, but further out. Where do you see those margins going, and what are the puts and takes in terms of that margin expansion? Then secondly, I'm just wondering if you could tell us about your leveraging of eBags. Where are you in terms of your own brand within the channel, other brands, where is that going to, and is there a possibility to leverage eBags or possibly under another name outside the U.S. eventually? Thank you.
Yep. Erwin, as we've talked in the past, I do think there's operating leverage in that core business. We generally think that it should be in this kind of 20-30 basis point range. When I think about Tumi, we've seen there, and we're losing the ability to report EBITDA margin for Tumi as we integrate it in the business. Let's say that Tumi EBITDA margin was up around 400 basis points, maybe just a shade below that for the half. As we push the direct-to-consumer business and our core business, there's a lag effect of getting the leverage for that. If you look at it within our SG&A expense, for example, that's up as a % of sales versus the prior year as we really push some of this direct-to-consumer strategy selectively in key markets like Europe, and a bit in Asia.
I do think that that will catch up. One of my views on when I think about Kyle's view on strategy, you're going to see me have a focus to balancing sales growth with delivering operating leverage in the business. I think on a go-forward basis, the right way to model this business is we should be able to deliver this kind of 20-30 basis points of operating leverage. Particularly as we move into 2019, I'll be focusing the business on that. With a balanced growth, so that we have growth that's sustainable while delivering profit. I'd like to get to the point that we're delivering operating profit growth faster than the sales growth. We know that that can happen in this business. We've all modeled it, and we've modeled it as well.
I think that balanced growth story is what I'll be focused on, and you should expect that kind of range. I think there's a little more to go with Tumi. Again, as we squeeze the last bits of margin, and we get it moving in some markets where it's not as penetrated, you'll get some leverage for Tumi as well. If you blend the business together, I think that range of operating leverage is what you'd expect. It's what I'm expecting through the full year. It's slightly lower than what I originally anticipated. I think that's in line with where we're projecting on the SG&A expense when you look at our SG&A expense at the year-to-date June numbers. As the new appointed CEO, you'll find me very focused on balancing the sales growth with delivering operating leverage on a go-forward basis.
Okay, great.
Then with eBags.
On the eBags front?
Oh, yeah, eBags.
Yeah.
I would say we're not quite at mid-stride with eBags. eBags, we have been shifting the mix. eBags is profitable from where it was. For the half, it's something like $70 million in sales and around, don't quote me on the number, I don't have it in front of me, but let's say kind of $1.5 million of profit. Obviously still dilutive to the business, but moving. A lot of that's coming from the shift in the mix of brands, but we're probably still in this kind of 40% range of brands that are own brands. The reality is, I think eBags really starts to look very attractive as you get the mix of our brands into the 60% range and above.
We've seen that work really well with Rolling Luggage, as you know, and KIKO Milano, which are a little bit of different business, but again, a multi-branded kind of acquisition that we brought in. We're really excited about leveraging eBags across the rest of our business. We've recently made a leadership change where eBags is feeding into our core North America business. We're now integrating the way we think and manage the business with our core direct-to-consumer e-commerce business within North America. We can really start to leverage both sides of the business, both eBags into our own business and getting eBags to help push some of our core business as well, which is really what we always wanted to get to with eBags.
We're now able to make that transition, and I think over the next 12-18 months, you'll see eBags start to really move up both in the profit meter, but being able to benefit the rest of our business. We haven't quite decided if we'll take eBags outside the U.S. We might use the concept, but maybe use a different name. We're testing some of that in Europe right now. That's to be decided, but it doesn't mean the concept we won't consider using outside of the U.S. As you know, within that eBags business, there's a terrific brand called eBags, which has some really great products, and we think that we can really leverage that brand to do other things on the technology side with bags to consumers as well. We're focused there a bit with eBags as well.
I'd say we're still cooking. We're not quite at half stride with eBags, and I think there's a lot more excitement to come with eBags.
Okay, excellent. Thanks a lot for your answers. Thanks.
Yep.
Our next question comes from the line of Frank Walkwitz from Oddo BHF. Please ask your question.
Hello, and thank you for taking my questions. First of all, I have to ask.
Excuse me.
Can you-
Can you speak up a little bit?
Yeah. Better now?
That's a lot better, yeah.
Oh, good. Okay. I have to ask this. Can you comment on the situation with the report made by Blue Orca? Are you currently investigating yourself, or are you investigated by any other authority or entity based on any acquisitions which have been made in May, especially on your accounting or on corporate governance? Is there any risk that you have to restate any financial items, any financial statements?
No risk. We put a very concise answer to Blue Orca a few months back now. We've made, in this interim report, just this one adjustment to the supplemental disclosure around NRV. You can see that in our results. That had no impact to our reported profit or financial statements within the business. It's a supplemental disclosure. We see no reason to think there's anything. We're kind of moved, as a team, off of Blue Orca and onto driving the business. As you can see off our first half results, the business never missed a beat. We've kind of put Blue Orca behind us, is the way to think about it.
You are not sort of investigated by any auditors or re-audited or whatever?
No.
Okay, good. You said your end of financial year, you will have a leverage around 2.3. Is this your desired leverage, or what shall happen afterwards with your free cash flow?
Well, I think this business will continue to delever. When we talk about kind of free cash flow and the ability to repay debt, that's always been part of our story. I think it naturally will project down below two times.
I was just giving you some sense where I think it'll be at the end of the year based on kind of the growth in profits and cash generation of the business. We'll be somewhere between 2.3 and 2.4 at the end of the year. If you remember, we were around three times. It's doing, I would say, exactly what I anticipated it would do. You should assume on a go-forward basis, barring any acquisition, that that deleverage will continue. We typically get the M&A question. You should know, as a team, we're very focused on the brands that we have in hand. There's a lot to do with Tumi. We're very excited about what's next for Tumi as we really continue to push it in Asia and Europe.
eBags, as I was just talking about, there's plenty to do there to really capitalize on this broader direct-to-consumer e-commerce strategy and really pushing that as well. We're not actively pursuing anything. Doesn't mean we won't consider things that come along, but as a team, we're super focused on delivering this growth story with what we have in hand and letting the balance sheet continue to delever.
Okay, brilliant. Any best guess what could happen? What could go wrong? What could stop your growth trajectory?
I think we're really fortunate we have so many tools in our kit to deliver growth. You could have some of this kind of macroeconomic or political noises impacting pockets of the business. We're seeing a little bit of that in Q3 in a handful of spots. We're pushing the business in so many avenues that for our ability to kind of deliver a sustainable growth story, where we might have some distractions here or there in the business, makes me feel very good about our ability to continue to deliver. I think there's not much. We're very focused on the strategy we have. We're continuing to invest behind the business with advertising and R&D, and all of that fuels into the strategy that's been delivering great results for us, as Tim started the presentation with, for the last five-plus years.
I can expect that to continue with what I can see in front of me today.
Brilliant. Many thanks.
Yeah, thank you.
Our next question comes from the line of Dustin Wei from Morgan Stanley. Please ask your question.
Hi, management. Thanks for taking my question. My first question related to the same-store sales growth. I think the second quarter same-store sales growth is stronger than the first quarter, especially for the North America and Asia. Could you comment the recent trend that you are seeing for July and August?
Well, if we go to North America and look at same-store sales growth, it was very strong in the first half. We've seen a little bit of cooling in the comps. I don't have the numbers right in front of me, as we've moved into Q3, particularly in gateway cities, we've seen some softness there. We've also seen Europe picking up a bit. We've seen this really terrific Europe number. I think, particularly, we can see it in gateway cities, where I think international tourists might be kind of shifting where they were for the first half versus the second half. You'll see if North America comps were kind of blended, let's say 3% or 4%, I think we're still in positive territory, but maybe not quite as strong as what we saw for the first half. I talked to the guys.
We think it's a bit of kind of a summer incident and I think we still feel very good about kind of our overall prospects for comp growth in North America for the full year. It's quite strong. When I think about first half, the results were really, really strong. When you look at the comp story across all of our regions, it was super strong. I'm not sure if I were kind of modeling, I would say that that's a sustainable story. Blended together, we'll still be in a very positive comp basis. We had a really, as you pointed out, really good first half, and Q2 had some really great momentum as well.
Thank you. How about Asia?
Asia, as I covered earlier, a little bit of kind of uncertainty is the right way to describe it for China and Korea. That'll have a little bit of impact, but the rest of Asia is continuing to do really, really well. Markets like Hong Kong, the growth rates have been incredible, and they've continued into the second half. Blended, it's probably not that far off from what the blended story was for Asia. Then Tumi really is continuing to be in stride in Asia. We're starting to both see comps within our own, the existing stores as we continue to drive product and advertising, but we're also starting to push the pace of new stores. I'm sure some of you guys traveled through Hong Kong.
That new airport store we added in Terminal 5 is off to the races right out of the gate. It's really terrific. You'll see a lot of that kind of retail footprint playing out for Tumi in both Asia and in a bigger way in Europe in the back half of the year as well.
Thanks a lot. My second set of the question regarding the GP margin. May I clarify, just based on the disclosure of a GP margin for Tumi by region, we kind of get that 70% GP margin for the first half, and that sort of implied that the GP margin for the non-Tumi was at 52%, and that's compared to 53.6%. Is that my calculation right for the non-Tumi GP margin decline?
I'm not sure how you're doing your math, our math would say our core ex Tumi was maybe down 10 basis points. You might have something wrong with your math.
Okay.
William can follow back up with you and point that out for you. I just don't have kind of the actual numbers right in front of me.
Sure. Thanks. Could you provide a breakdown for Tumi's revenue by wholesale and retail, and what's the GP margin difference?
If you look at the page that I have for Tumi, I think I give a pretty good picture of what's kind of driving wholesale and retail by region. Generally, when we think about the retail mix, Tumi historically is a heavier retail mix business, and that should continue. The Tumi business is probably today 70% retail and 30% wholesale. From a margin perspective, the overall kind of retail margins for Tumi, if I look at North America, for example, overall it's getting close to 70%. I would say our retail gross margins are probably just a little above 70% for North America. From a mix perspective, that's how you get to this blended 70% that I think we will end up for when I get to 2019. That mix probably won't change.
We'll continue to drive wholesale, but retail and direct-to-consumer e-commerce will be a big piece of the drivers for Tumi on a go-forward basis.
Right. Going forward, we are going to see higher Tumi gross margin. It's going to be like like-for-like improvement in the same channel, and not going to be driven by the mix shift for different channel.
Yeah, I think there's a bit more to get out of the margin. As we're kind of finalizing what I would say the sourcing benefits, we'll get a bit more, but it's not going to be mix that'll drive Tumi margin. I think, on a blended basis, the retail wholesale mix will look largely the same. We'll see as it plays out. I think Asia and Europe will be learning as we go. It's really kind of early days in a market like Europe. I might reserve the right to change my opinion a year from now once I see where the drivers of the business are. In theory, it should look very similar with a strong push on the direct-to-consumer brick and mortar, and also e-commerce, which has been one of Tumi's historic strengths. The mix should stay largely the same as it grows.
Okay, thanks. Sorry, my third set of questions is on the expenses. In terms of the A&P, are you going to sort of maintain the 6% for the full year?
I think we'll be right in that range, let's say plus or minus 20 basis points. It kind of shifts around, but as a business, you should be thinking about us spending around 6% on A&P. We were a little higher than that in the first half, but a lot of the Ronaldo campaign for American Tourister was more first half weighted as we got that moving. For the second half, that as a % of sales probably would be a slightly lower number. I think as my models look right now, we're probably just a shade under 6% for the full year. Last year, I think we were 5.8%, so we'll be generally in line with last year, and that should be where you'd expect us to play, right in the 6% range.
Got it. For the distribution cost, I think the first quarter and second quarter stayed a similar trend as saying above 100 basis points up year-over-year. Is that related to the DTC, and is that going to continue with that kind of continued increase of the distribution cost ratio?
Well, I think when we talk about balancing growth and getting to some operating leverage, I think that maybe that pace will come down over time. You had also two things happening with the distribution expense in the first half this year versus last year. You had the Tumi distributor buybacks in Asia, which naturally brings up the SG&A because we're kind of managing those things directly versus the wholesale. You had eBags, which has a disproportionate mix as we fold in eBags first half this year versus first half last year. You have some of the direct-to-consumer push, particularly in Europe where you'll see their kind of SG&A slightly higher as those retail stores. We were kind of rapidly moving to add doors in 2017 and into the first half of 2018, those will take a little time to mature up.
I think that pace will balance out, and you should see that a lot of the leverage that we're talking about will come from this area.
That's sort of suggesting that for the second half of this year or next year, distribution cost ratio will not expanding as fast as what we are seeing now.
That's my read at the moment.
Okay
We'll be working on our plans for next year, but in theory, that's what should be happening. If I just adjust for the distributor buybacks and eBags, for sure you'll see that effect.
Thank you. On G&A, I think it's down quite a bit in the second quarter versus the first quarter. I noticed that there's no more advisory fees paying for the implementation of accounting policy change. Should we expect sort of the low 6% kind of range for G&A going forward?
I think that's the range we'll continue to deliver leverage. We finished the revenue recognition accounting standard, we now have the lease accounting standard. You shouldn't assume that some of the noise on these kind of these new accounting pronouncements is gone. That lease transition, which is effective 01/01/2019, is a big piece of work as well. I wouldn't necessarily say that line will shift, but we should be able to continue to deliver some leverage on the G&A side.
Okay. Thank you.
Yep.
Our next question comes from the line of Rosanna Burcheri from Artemis. Please ask your question.
Yes, hi. Can I have a little bit more color on the inventory position? I noticed from the publication of the results that the operating cash flow before net working capital is actually increasing half-year over half-year.
Yeah.
There is really this go down in terms of net working capital. I remember that Tumi had higher inventory days than when it was quoted. I just wanted to try to understand if with the move from wholesale to direct-to-consumer, it's actually a trend that we are going to keep on seeing, or we're going to see even more seasonality during the year just to be comfortable on the free cash flow generation over the long term. Thank you.
Yeah. I would say, I think about inventory and working capital as a little bit of a pendulum. We consciously made a decision to bring inventory up at the end of last year, off the back of the start of last year, where we were slightly lower than we wanted to be. If I were critical of us, the pendulum maybe swung a little too far to the right. We have 140 days of inventory at the end of the year. That's higher than what we historically feel like we should be at.
I would anticipate that our inventory days will play into this kind of 125, 130 days. If we do that, our working capital efficiency is somewhere in the 13% range, little kind of ±10 or 20 basis points, which I think is a good place for this business to be. You obviously have timing of AP, on a blended basis, that's the right kind of range. A lot of our direct-to-consumer, when you look at our direct-to-consumer push in the business, a lot of it's actually coming from e-commerce, which can be managed with our kind of central inventory. It's not that e-commerce and this shift in direct-to-consumer with our kind of e-commerce portion growing very rapidly will have a big impact on the inventory levels.
Tumi, when we bought them, had slightly higher inventory days. We've helped manage to bring those down more in line with the days that we have today. I think even with Tumi blended in, thinking about a business that's got the 125-130 days of inventory versus 140 that we're at today is the right kind of sustainable level for the business. We don't see that changing. We don't have a lot of kind of seasonality swings in the business, and we don't have a lot of seasonality in our products. You won't have these kind of unusual gyrations in inventory because of fall and spring sell-ins. It's changed a little bit from where we were three or four years ago, but as a mix perspective, not enough that it moves the needle on the working capital measures between quarters, per se.
You'll see it swing down. The other thing is when you look at the cash flows, last year's was unusually low. You get the kind of swing effect of that within our cash flows. As a team and me personally, we're very focused on the cash generation of the business. You should see this kind of dynamic change as we get into 2019 for sure.
Thank you.
Yep.
We have a follow-up question from the line of Anne Ling from Deutsche Bank. Please ask your question.
Hey, hi. Sorry, I have two more questions. The first one is on the American Tourister. For the first half, we have a very good set of results with a very successful campaign. How should I look at, like in the second half, should we think that it should normalize, and how should we look at the brand's growth in 2019 onwards? Also, in the presentation, you also mentioned about widening the price range for your product. Does it mean that you're planning to move it higher or lower? I understand that for a different price point, you have different brand in terms of positioning. When you talk about widening your price range, does it mean that you are referring to within each of the brand, you're trying to expand your range either up or down?
Would you help me understand a little bit more on this part? Thank you.
Sure. It's always a good question when you have a great first half with a brand, what's it going to play out to, right? It's very strong first half with American Tourister at 24%. We've seen very good momentum carry into the second half. As I said earlier, Europe had a kind of record growth Latin America's had really tremendous success with American Tourister, and Asia continues to. From a blended basis, I don't think we'll keep that pace, but you'll see a very strong double-digit growth for American Tourister for the year. I'd probably say in the high teens level for the full year. That's natural as you're coming off the push of the campaign.
When you get to next year, I think American Tourister is a brand that has lots to go at, and this really feeds into the widening price range topic. It's less around us taking brands and stretching their price points, but it's pushing brands that play in certain price points within markets where there's opportunity. We've been seeing that play out in Europe. We're seeing it play out in Latin America. I still think there's opportunity in North America. We saw American Tourister up 12% in North America. I think that should continue, and it's a bit of a white space for us within North America. As far as Tumi goes, I think the price position's right. We're not looking to dramatically shift that. It's really around executing Tumi at that price point.
I think the one brand that there might be some range to push up a little bit is Samsonite. We haven't baked it into our model, there is a pretty good gap between Samsonite and Tumi. As a business, we will probably be looking at that as well, that won't be anything other than filling in some opportunities. It won't dramatically move the outlook for the brand Samsonite, I think there might be some opportunities there. The rest of the brands, I think are playing in the right price zones within the business.
Okay. Thank you.
Yeah.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We have a follow-up question from the line of Dustin Wei from Morgan Stanley. Please ask your question.
Hello, management. I have a question that I hate to ask, I sort of have to. This is about the trade tension, the tariff. I know there's a lot of uncertainties going on, just want to know in terms of your scenario analysis, if the worst case is happening, how are you going to deal with the potential tariff increase that are going to pass through that cost to the customer? What kind of strategy that you currently have in place? Thanks.
Yeah. We're watching it closely. As you know, we're already subject to some tariffs, but there's a step up in the tariffs in the latest proposals for our industry. The reality is, I think if it goes through, it will have an impact to cost and it'll impact the entire industry within North America. You should assume that we'll be pushing enough of that increase through to maintain the margins of our business. We won't be alone in that space. The shame of that is consumers lose out on that front, but we'll be doing everything we can to maintain the margins and maintain the total balance of cost of products to manage the pricing of our product. The reality is, if it pushes through, us like everybody else in the industry will be feeling exactly the same pressures.
All right. Thanks a lot. That's very clear.
Yep.
Once again, if you wish to ask a question, please press star one on your telephone.
Okay, operator. I think we're good.
Yes, sir. There are no further questions at this time. Please continue, sir.
Okay. I wanted to thank everybody for joining the call. A little different format this year, but hopefully we're able to get everybody in different time zones. Appreciate you all joining and look forward to seeing some of you as we move around over the next few weeks. Thank you very much.
Ladies and gentlemen, that has concluded the conference for today. Thank you for participating. You may all disconnect.
Thank you.
Thank you.