Everyone, thank you very much for attending our 2013 final results announcement. Today, we're pleased to have Tim Parker, our Chairman and CEO, Kyle Gendreau, our CFO, and Ramesh Tainwala, our COO, with us today to present the 2013 results. Without further ado, I'll have Mr. Parker begin the presentation. Thank you.
Well, thanks, William. Morning, everybody. Very good to see you all here, bright and breezy. We're very happy today to be presenting what is the fourth year of consecutive record results of our business. For the fourth year, I think, in which our EBITDA has grown over 15% and our sales have been compounding in double digits. Just go through the, thank you, the key points of the results are our sales up 15% over 2013. Our EBITDA up 18%. Our net income up 13%, although after adjusting for the stock compensation costs on a more like-for-like basis, up 16.6%. Those are the key points. Very pleased that our business, for the first time, has reached sales of over $2 billion. That's a great landmark for us. On a constant currency basis, of course, our turnover was up by 16%.
Being a global business, a very diversified business, of course, we are subject to currency fluctuations, and last year, we saw significant depreciation of the Japanese yen, the Indian rupee, the Australian dollar, balanced by a rather stronger euro. The net impact was about $18 million over the year. Our gross margin off just a few basis points, and that is largely the result of a very strong performance of the business in America, where the margin is slightly lower, and in particular, in our wholesale business. The gross margin driven really by the mix of business. However, still in a very good place. If we move on to the next slide, just looking at EBITDA. Up 18%. This is the best EBITDA margin I think that we have achieved in the business, 16.6%.
Again, I think the interesting question to look at is although our sales are up 15%, our profits are up, and the EBITDA margin has moved perhaps by a little less than you would expect. That is largely driven by the fact that we continue to invest significantly behind our brand in terms of marketing. We continue to invest significantly in terms of research and development. Looking at the net income, again, up by a very healthy 13%, 16% on a fully adjusted basis. You may note that the tax rate for 2013 was up slightly. This again, is due to regional mix. America is increasingly, sad to say, the outlier in terms of taxes on corporate profits. To the extent that the company does better in America, that tends to pull our tax rate up.
I think it's fair to say that we don't expect the tax rate to go up any further in the future, and it may actually come down a little bit. Just looking at the general overview of our business. I think this is a performance that reflects the true strength of our company. We are not a one-trick pony that depends upon the performance of the Chinese market. The Chinese market, as I think I've explained on a number of occasions, is only around 9.5% of our business. We're not in the luxury space. We don't depend on a very narrow band of consumers to buy our products. We have a premium brand in Samsonite, but we also have a very strong brand in American Tourister. We're a business that trades in over 100 countries around the world.
Our growth is generally coming from many, many different sources, and that was certainly true in 2013. I think another source of strength in our business is the fact that we are driven by the world travel and tourism market. This is a market which continues to expand organically. Last year, I think another 50-odd million tourists traveled around the world. Anybody who looks at aircraft orders, airports, trains, will see that the world is traveling more and more. That has to be a very good secular trend for our business. Although our Samsonite brand continues to grow, American Tourister almost increased by a quarter last year. This, I think, is the point I was making earlier, that we are not a business which is dependent on one consumer segment. We are specialists in travel, and bags, and luggage, and that's actually performed very well.
The two acquisitions we made, Hartmann and High Sierra, contributed around 4% of our sales in 2013. Now, I expect in the course of this year that we will be launching those brands in Japan and Korea, in the case of Hartmann. India, in the case of High Sierra. We're launching High Sierra as well in Europe. 2013, very early days for these brands, but we're very pleased with the progress so far. Advertising and promotion, $129 million, and that is far in excess of any of our competition. Last year, we spent around 6.3% of our sales, and we continue to view marketing as something that we must continue to invest in across our business. As our sales grow, we expect our marketing investment to remain broadly consistent at around 6.5%. Of course, the business is highly cash generative.
Last year, operating cash flow was around $193 million, and we expect to be able to generate in excess of $200 million in the coming year, along similar lines of conversion of EBITDA to cash flow. As I mentioned, our results are really right across the business. Asia, last year, grew by 12.3%, in constant currency terms, over 15%. A fantastic performance in North America. Excluding acquisitions, our American business was up 14%, and that is all down to getting the product right. As I think I've explained, we do business with a fairly smallish number of big box customers, and we've continued to expand our share of their business. To see the American business expand by almost a quarter is obviously an outstanding achievement. Europe, we were also very pleased with the outturn in Europe.
Excluding Spain and Italy, which obviously were problematic markets in 2013, our European business was up over 11%. Again, these are our double-digit increases in markets which, from a consumer perspective, are quite mature. That was very encouraging. Latin America up almost 12%. I think you can see that last year was a year where the company achieved a very good outturn, despite the fact that China, which is a market that the people discuss frequently, was only up 5%. We'll talk a little bit more about China in a moment, but I think for me, what it says is that our company can perform well under pretty much most conditions. As long as there isn't some sort of global meltdown, we have great resilience to our performance, because it is so spread around different markets of the world.
As I said, although China was a slightly more tricky market, we had much to be pleased about in Asia, and I'll just get Ramesh to comment a little bit on that.
As Tim already said, the Asian business grew on a constant currency basis by 15.6%. Within that, as we said, American Tourister grew by about 26.6%, and Samsonite somewhat more moderated at about 8%. The travel segment grew by 14%, the casual bags, which grew by 88%, primarily driven by the new brand, which you see in the room also, the RED by Samsonite, as we call it, our foray into the casual bag segment, which we primarily started from Korea, and now we're expanding that new business into other North Asian countries, primarily China, Taiwan, Hong Kong, and Singapore. The business category is down by 3.1%, largely because of decrease in B2B orders in China.
Also as a result of the consumer preference changing from very formal business bags to casual bags, which you see it also in this room, and that's also the reason why the casual bag category has grown at a faster clip of 88%. The adjusted EBITDA margin increased mainly due to a slight decrease in the advertising as a percentage of sales. China, which is always a very hot topic to talk about, everybody's curious about China. China also, our sales grew at a more moderate pace, which is 5.3% on constant currency basis. Definitely within the business, you can see that we find a bigger growth which is coming from the American Tourister category, where Samsonite and primarily the B2B orders, which is the gifting part of our business, have been somewhat slow.
On the other end, South Korea have grown at 27.9%, primarily because of the growth that we have seen in American Tourister and Samsonite RED. American Tourister, primarily because our business in e-commerce and some of the new emerging channels like TV home shopping has been growing very, very rapidly, and we have been able to do a good job on these new channels. India also recovered on constant currency basis after a sharp from 2012. It has grown at 18.3%. Once again, primarily driven by American Tourister. Japan continues to grow at 18.6% on constant currency basis. Here, both Samsonite and American Tourister continue to grow with our penetration, our distribution getting more and more enlarged in Japan. Hong Kong, on constant currency basis, grew by 18.2%, led by both a sharp increase in American Tourister of 25.8% and also Samsonite 13.5%.
China makes up, as Tim has already explained to you, only 9.4% of our total sales. Undoubtedly, it is one of the most interesting market, and we believe that China will continue to be one of strategically most important market for us in years to come. The growth in China on constant currency basis moderated to 5.3%, mainly because of overall slowdown in economy. Also, there was a decline in the consumer sentiment, especially at the top end of the market. Excluding B2B, which is the B2B sales that we have, at constant currency basis, the sales grew at 8.5%. Whereas American Tourister, which is a brand which is targeted more for self-consumption and for the young Chinese who are looking to travel out, have grown at 24.1%, and we believe this will continue to be one of the major growth drivers in years to come.
Okay, thanks very much. North America, as I said, is a fantastic year for us. If you exclude acquisitions, the business up 14%, our wholesale business up 16%, and the growth coming both from Samsonite and American Tourister. You can see the contribution of Hartmann and High Sierra have resulted in an increase in our casual business of over 171%. That is now an important part of the American business. Because we control our costs very carefully, we have a very low overhead structure in America. We do tend to see very positive leverage from the increase in sales. This is the first time we've actually achieved over $100 million from our North American business. Some very important milestones. Of course, it isn't feasible to continue this kind of growth forever in a market that's very mature.
And so, whilst we've had a fantastic year in 2013 in the States, we expect America to grow in the future, excluding acquisitions, more in line with the overall growth in the market, even though there are still some areas where we can expand our market share. Last year was a truly vintage year, and our American colleagues did an absolutely fabulous job. Europe, again, I think, because we had some very good products, and here I'd mention our Curv range of cases, which continues to be a big driver of our business in Europe.
The market in Europe is not doing badly at all. In fact, the hard side market in Europe is expanding at a rate of over 15%, and I think that is because there's been a lot of innovation in hard side products. They're also relatively more competitive than they used to be against soft side cases. The actual market in Europe isn't in bad shape at all, and I think we had some very good performances in the U.K. That was up 28%, Russia up 28%. I think I've mentioned that within a matter of years, Russia will probably be our second largest market in Europe.
Some very good performances out of Germany, 12%, and France, 9%. Good results across the board. We also expanded in the non-travel categories at a pretty good rate, too. Our casual business up 17%, and our business bags up 14%, and that was very good to see. As I think I've mentioned, last year, we struggled a little bit with business bags, so this was a very encouraging performance. I think we may have seen the worst in terms of the Spanish and Italian markets. They were down slightly in 2013.
We have seen in recent months some rather more positive trading results, and I'm guardedly optimistic, never anything more than guarded, but guardedly optimistic about prospects in Europe in 2014. That was the European market. In Latin America, I think we've explained before that our Latin American business has a very, very strong Chilean component to it. About half of the sales and about 70% of the profits come out of Chile. The Mexican market is also important, and as I've explained, the Argentinean market, we're having to contract rapidly. What we did do in 2013 was to move our Brazilian business to a direct trading model from a distributor-importer structure. We've also set up our own sales businesses in Colombia, Panama, and Peru. That's cost us a little bit in 2013. That's why, in effect, the EBITDA margin is down just a little bit.
But we do expect to see the fruits of those investments come through in 2014. In constant currency terms, the Latin American business is up 12%, and we were fairly content with that. As usual, on the next slide, just to breeze through some of our top markets to reinforce the very broad spread of achievements in our business. I think I'd point you towards the constant currency growth, looking at America, China up 5%. South Korea, tremendous performance in South Korea, up 28%, India 18%, and that was very good to see. We had a fairly rocky year in 2012. To see the Indian market returning to strong growth and profitability was very positive. Germany up 12%, France 9%, as I mentioned. Hong Kong, again, a very good market for us, up 18%. Japan up 18%, sadly not in dollars, but in yen.
Our business in Japan, we're very confident of continuing to expand at a rate in excess of 15%. A good year in Chile, up 16%. Italy and Spain, I've mentioned, should be better this year. Over the page, you can see how Russia has become actually quite an important market in its own right for our company. Thailand up 17%, Indonesia 27%. That's a market to watch for the future. These are markets which are beginning to reach the $20 million threshold, and that's a point at which we can usually move forward quite briskly. Taiwan, 8%. Turkey, 22%. Brazil, that's not a performance that we're happy with, and we will do a lot better than that in 2014. Malaysia, 12%, and South Africa and Philippines. Many emerging markets, all with double-digit growth. On to the next slide.
Although Samsonite continues to be 70% of our business, it's good to see that American Tourister, which was up almost a quarter, is now around 21% of our total sales. Hartmann and High Sierra, 4%. That number will be rather higher in 2014 as we get the full- year effect. Others, mainly the brands that we trade with in Chile. As I stressed at the outset, our company is not a single-brand company selling to a stratified group of consumers. We have pretty much something for everybody above the mid-level segments of the market in the categories that we trade. As I mentioned, we have been working hard on the two acquisitions that we made. I think we have a fantastic range of products for Hartmann. We are opening a store in Ginza in Tokyo. We've got the promise of a lot of points of sale.
We have the best product range I think we've developed. We've put the very best technology that we have in Samsonite into Hartmann products, and I will eat my proverbial rucksack if we don't do very well with this brand over the next few years. If we look at High Sierra, again, we've started to make earnest preparations to develop this brand in Asia. We're launching it. Have launched it actually in India with promising results. Launching it in South Korea and also in Europe this year. We launched it at the luggage fair in Frankfurt. We will begin to see meaningful contributions from these acquisitions, I think perhaps not so much in 2014, but after that, I think we will get some really good traction outside of the U.S., where, of course, we expect to do well in any event.
We've also just opened up the first, or I should say, acquired our first Hartmann store on Madison Avenue, and I'll show you a picture of that in a moment. Ironically, it used to be a TUMI store. We aim to do better. Next slide, just to give you a flavor of the new—w ell, it's not that new. We've had it now a couple of years. The development of our Samsonite RED casual brand. Very promising results in the Korean market, I think this just shows you that some innovative marketing, some very good product design, can provide us with opportunities to develop new and younger customer bases. This has been a tremendous success. We're now up to around $30 million. We hope to get that up to somewhere around $50 million this year in Asia. You can see, what's the name of this gentleman again?
Kim Soo-hyun.
Kim Soo-hyun. No, that's the new one, isn't it? [crosstalk] . This is the old one. I lose track. We always have these soap stars.
This is the newer one.
Kim, yeah, Kim—
Kim Soo-hyun.
—Soo-hyun, yeah. I'm getting mixed up with Kim Jong Un, and we don't want that. He's a good lad. He's an excellent lad. The interesting thing about these soap stars is that they have a catchment, which is well beyond Korea. They're not cheap, and if the show does well, they get very expensive. It does make a difference. Actually, what's impressed me is the genuine enthusiasm actually, with which some of our young actors have embraced our products. This has helped, and I think this is an area that we can certainly develop in the future.
Next few slides I've put in really just to give you a flavor, not only, as I mentioned, of the diversity of markets that we tackle, but just the sheer diversity of products. The great strength of our business is that we source our products from over 100, actually now around 200 different suppliers all over the world. We sell a huge number of SKUs through very complex logistics systems into over 100 markets. This distribution platform and sourcing platform is really the core strength of our company and what will allow it to grow in the future, not only organically, but through acquisition as well. You will get an impression of just the sheer range of products that we sell. These are some of the best-selling products in Asia. Synconn, Optimum down at the bottom. Those are very big-selling soft side lines.
Inova, the top right, very interesting, very successful product in Asia. It was a product we developed in Europe, didn't do so well in Europe, but has done fantastically well in Asia. Firel ite, which is one of the Curv ranges, does very well in Asia. You can see here some of the very successful casual business products. We've pointed out before the fact that the business world is getting more casual. Backpacks are selling extremely well, and I think the Samsonite and American Tourister brands are very well-placed to take advantage of this trend. Our products in America, rather different. The collection on the bottom uses an innovative and patented spherical wheel system, which has been enormously successful at Macy's. You can see here, one or two items. LIFT is a derivative of a European product, so biggest selling soft side item. Some of our hard side cases.
Again, the reason we're successful in America is that we take a product and really tailor the front panel, so the product looks different for each of our customers, and they have a unique product which they can sell, which is very important in the American market. This ability to manage a lot of different SKUs for a lot of different customers is key to our success. In Europe, again, I think one of the things I hope you might notice if you come to a few of our presentations is there's a lot more color. The luggage market is becoming, I think, less black, more colorful, a lot more attention to fashion trends, and a lot more general consumer awareness, certainly of carry-on luggage and bags. You can see here quite a few colorful products. One product I would point out in the top right-hand corner is S'Cure.
This is a product that we manufacture in, probably in Belgium. It's a polypropylene product. We sold over 333,333 units last year, which is an awful lot of cases. I might mention that actually as a total business, we ship around 42 million pieces of bags and luggage a year, which is, if you think about it, is a lot of containers. You can see here an interesting, just a range of the new Cosmolite. We completely revamped our leading Cosmolite range with very strong results in Europe. Even on the bottom, you can see some of our animal characters for kids. Of interest is that we've just concluded a license with Disney, and I think the Disney license will give us access to a lot of the children's and youth market in Europe. Using our distribution, we can produce some very meaningful financial results out of that.
American Tourister, again, fantastically successful brand in Asia, and I think Ramesh and I feel that this brand has got further to go in America and a lot further to go in Europe. This is a brand that has some very good products now, very distinctive, fun products. We've got all the sourcing in the right place, so we're able to deliver the products at the right margins to the market. These markets, in value terms, are very big. As you move into the sort of bulge of the middle of the market, there are some very big opportunities, and we intend to take full advantage of those opportunities. High Sierra, again, a lot of our sales are still the basic sort of back-to-school backpack business.
Again, we're redesigning a lot of the technical products in the range, and we're very confident about prospects for High Sierra in the American market. Some very, very nice products indeed. You can see here we've got some very quite interesting casual luggage items as well. Also hydration. A lot of people now riding bikes have those packs on their back for water. I don't know why they need so much water, but they do. This is a growth market. The world is very water conscious. Do you remember? I don't know if you remember. Did anybody carry a bottle of water with them everywhere five years ago? I think not. Anyway, that's off the subject. On to Hartmann. Hartmann is, again, something that we think has enormous scope for growth. The hallmark Tweed Collection has started to do very well in the American market.
We think now we've got a formidable range of products to launch in Japan and Korea, and we'll be looking at some other shops in Hong Kong we're hopeful of opening. I think this can become a very strong brand indeed. The DNA is very clear. The products are very beautiful. Lovely leather trims and just what the upmarket traveler, I think, is looking for. Watch this space. Next slide, we just put some of the brands that we sell in the important Chile market. We have started completely off our own bat, the handbag brand on the right. The Secret brand is something we started last year, and it's already making a meaningful business contribution.
I think this could be a model for the future because although the company has some very good acquisition prospects, I think we can also start some categories simply organically and achieve very good results. Handbags is an area that we'll certainly be looking at. Next slide, just looking at the different product categories. I think what's encouraging here is that although travel continues to be important for us, the casual business is now 10% of the company, and the business category is 10% of the company. What we said when we floated is starting to happen, which is that we are no longer quite so dependent on the travel segment, but we are building meaningful positions in the casual and business bags. Points of sale, next slide. Again, we added about 1,000 points of sale. I think I said before, points of sale vary so much.
We could be talking about our own store or we could be talking about just a single Walmart store or we could be talking about a single military store in India. I don't place too much importance except that 46,000 points of sale globally is a lot of points of sale, and I think that's one of the reasons why the company's business is so resilient. Next few slides, just some of the stores that we've opened. I think, again, another point of difference for our company is that we are not dependent upon a single mono-brand retail concept. We adapt our retail concepts to different markets. You can see here a range of different formats, American Tourister, a mix of High Sierra, American Tourister, Samsonite RED, all in different locations across Asia, China, Korea, India. Another Black Label store in Shenzhen Airport.
In Europe, stores as far afield as Poland, Russia, a store in Israel, and down to Chile. We do different things in different markets, and I think that is the great strength of our business. Advertising. The share of sales slipped slightly last year, but we still increased our spend by over 10%, and we intend to do that in 2014. We are very clear that as we increase the business, we want to spend more on our brands. We make nice products, but we know that our long-term source of competitive advantage relies on convincing customers that they should pay extra to buy our brands and to communicate with our customers about the strengths of our products. As always, just to give you a flavor of some of the advertising around the world, you could not have missed Samsonite, I think, in any of the world's airports.
I think Shanghai Airport here with Chen Daoming, who's been very good at promoting our business products in China. Some Australian pics, Samsonite RED in Korea. Lots of different things going on. American Tourister, again, very widely promoted around China particularly. The good thing is that this brand, I think, has now genuine breakthrough status, and we can build a lot on the platform that we have created. North America, again, we had 217 slots, or was it 271? I can't remember which, in Penn Station in New York in November. Busiest railway station in America, couldn't miss it. In America we do a lot of targeted print advertising and outdoor advertising, and quite a lot of stuff around airports as well. Again, we have increased our share and brand position in the American market by a substantial amount over the last three years.
American Tourister is the partner luggage brand for Disney. This has afforded us many opportunities, and I think we're reaping the benefits there. It's important to remember, we don't just sell American Tourister in Walmart, we sell it in Target, we sell it in Bon-Ton. We are beginning to widen the American Tourister franchise, and I think that bodes well for the future. In Europe, again, slightly different take, bit more focused on our Curv product ranges, bit more emotions. Where are the adverts?
We can show them right now.
Okay. We can show you some adverts right now.
Okay. We have prepared for you a selection of different ads that we've run in different parts of the world. We want to start first with the Samsonite RED, then we will have an advert on American Tourister that's being broadcasted here in Asia. Finally, our latest ad in Europe on Samsonite. Let's start with Samsonite RED. Thank you.
[Presentation]
The last one, the Samsonite commercial, please.
[Presentation]
Thank you very much. Now the stuff you've been really waiting for, the financial.
Oh, yeah.
My good friend here.
They only gave me a few slides.
Yeah.
Good morning, everyone. I would label, I'm on slide 40, great financial highlights versus key financial highlights. Some of this is a repeat of what Tim has already showed you. But EBITDA margin, as we've been saying for the last few years, continued to grow. Even with a bit of decrease in advertising spend helping that, margins were very stable. We've continued to move the EBITDA margin up 40 basis points. We've grown EBITDA 18% or $42 million this past year. We're quite happy with EBITDA progress. Net cash position, another thing that we've been very consistent with in our cash generations was, Tim said, we generated $193 million of cash and close to double our net cash position in 2013 to $210 million. With no debt. I'll show you a balance sheet in a second.
Our working capital, we continue to manage very, very effectively, running a little bit better than our target of 14% for 12.9%. Quite happy, a bit of progress on inventory. We've maintained accounts receivable days, even with the U.S. business growing quite a bit where a lot of our receivable days are. Capital expenditures, we spent $57 million, a bit more than what we spent last year. We told you we were going to do that, and it was really around expanding some of our warehousing and manufacturing capacity in Europe, and continued retail CapEx spend for retail rollout. Our reported net income up 18.6%. Adjusted net income, which we've guided you to, up 13.2%, as Tim said. If you take out the non-cash option costs that we had in 2013, up almost 17% for net income. We're quite happy with that. The same for earnings per share.
The same growth is applying off of what you're seeing for net income. Then I think, to a lot of people's a bit of a surprise, we've agreed to, with our board, to move up our dividend yield. Our policy's been to have a progressive dividend policy. We're growing faster than earnings. As we look at our cash position, cash generation, and continued strength in the growth of our business, we felt it was a good time to move our yield up to something more appropriate. I've got a slide on that as well. We're quite happy with that. From a balance sheet perspective, $225 million of cash. We've increased our net cash position, as I said, by $93 million. That's with some additional pension funding. If I took some pension funding out that we did in the U.S. market, that number is even better.
Working capital strong, and we've got full access to our revolving credit facility. We've got lots of capacity within our balance sheet to do what we want to do on the M&A front. From a working capital perspective, we've brought our inventory days down just a bit. Quite happy with that. That's across all regions. We're managing inventory very, very well. I think when we IPO'd, we thought 120 was the right days, and I think a few folks said, "Oh, we could probably do a bit better." The reality is, we continue to do better as the business grows. In inventory days, we're happy. We've maintained the receivable days, and the payable days changed slightly. That's really around timing of year-end payments, just as the calendar falls and as we're making our final AP payments at the end of the year.
On balance, working capital days fairly consistent at around 50 days. On the CapEx side, capital expenditure side, we continue to expand on the retail front. We brought that number up a bit in 2013, really as we continued retail rollout, largely coming out of Asia. Asia, we spent just under $9 million on retail rollout, where we opened 90 retail locations, either our own or some franchise stores in that number, but continuing to push retail rollout. We opened 25 stores in Europe, we spent $4.5 million in Europe on retail stores. In the U.S., we opened 10 of our own retail stores. We spent $4 million. In the midst of that, we're also been revamping some of our stores. In that retail CapEx number, we're modifying some of our stores to keep them fresh.
On the product development, R&D, and supply, as we said, we made some investments in the warehousing in Europe. We've built an additional warehouse right next to our facility, which is allowing us to move out of some of our third-party warehouses. That'll have the forward benefit of improving our distribution costs. We've also expanded, as Curv products have continued to be very successful, have doubled the capacity in our Hungary facility. We're continuing to look at other opportunities there as well. Both those projects are in the mix, so there'll be a bit of spend in 2014 as we finish those in the first and second quarter of this year. We continue to invest in our systems. Our SAP system, which is very effective for us managing our business, we were due for a hardware upgrade for those.
We're at the five-year mark on the hardware for our SAP system. You're seeing some investment in just refreshing that hardware. Then shareholder and distribution to shareholder information. Our shares outstanding have stayed the same. We've talked about our EPS growth, both in reported and adjusted. The big news is we've brought our dividend recommendation up, so the board and the management are recommending an $80 million distribution, which is a payout ratios around 45% and bringing our yield to just over 2%. I've got a slide on that, but just I'll walk you through some of the details. We also continued our option program. In January of this year, we issued another 12 million and change of options to the management team, fairly consistent to what we did in 2013. That's part of a strategy of having an annual option program within the business.
In the distribution yield, last year, we had a dividend or distribution of $37.5 million, payout ratio of 25%, and a yield of 1.2%. As you know, we've been growing our dividend since we IPO'd at a faster rate than earnings growth. That's always been our intention. As we looked at the strength of our balance sheet and the continued cash generation and really the confidence we have in the business, we thought it made some sense to move it, and the board thought to move the yield to something more appropriate to other global consumer companies. We think a 2% yield is the right place to be. The yield will stay the same. We'll continue to grow the dividend, and it'll be more in line with the growth in our profits. The question is, well, what does that mean for everything else we're doing?
The reality is the business has a lot of cash. We generate a lot of cash. As Tim said, we'll generate another $200 million of operating cash flow this year or more. We have a very active M&A program that we're pursuing. The question is, what do we feel on capacity? As I said, we have full capacity on our revolving facility. We're a debt-free business generating a lot of EBITDA. We have a lot of cash actually on our balance sheet, and we'll end the year with a good amount of cash. The management and the board feel very confident in our ability to continue our strategy of pursuing M&A, continuing to invest in the business in R&D and advertising, and being able to do this yield. We're quite happy to be able to do it, and I think the market will be quite happy with that as well.
My last slide is just on share performance, and we've always been running close or slightly better than the Hang Seng. In 2013, we finally started to kind of move in the direction that I think our share should have gone. We've outperformed in 2013, and I'm optimistic we'll do something similar in 2014. That's my view.
Modesty forbids us from putting on this slide the other companies that floated around the same time as us. But if we were to, I think it would reveal quite a positive picture. Just moving on to final section, outlook and strategy for 2014. As I think I mentioned, our business is driven by the world market for travel and tourism, and the forecasts in the future continue to be quite positive. There's a United Nations organization. God knows why it's United Nations, but it does forecast travel and tourism, the World Tourism Organization. They're expecting 4%, 4.5% growth. The luggage markets, I think one of the more recent reports suggested the luggage market should be growing at around 4% or 5% over the next few years. That's in volume terms.
We feel very confident that we can do rather better than that, and I thought I'd just explain in a moment a few reasons why. But before that, this is our favorite slide. This shows the performance of the company over the last four years. I think, since we transformed the company back in 2009, our sales have grown at a compound rate of almost 20% and our EBITDA at a compound rate of almost 60%. Of course, as the numbers get bigger, it gets harder to achieve significant increases. But we have increased our sales by 13% and 15% in the last two years. My sense is that is doable. We can continue, I think, to get double-digit growth organically out of the business, plus whatever else we can add through M&A.
If we can continue that sort of trend, then we are fairly confident of getting our EBITDA and net income to move in the vicinity of 15%-ish. That is the sort of model that we work with as a company. I feel 2014, we have some pretty good engines of growth, and I've listed a few of them on the final slide. First of all, the markets for travel and tourism, as I mentioned. Secondly, although last year was a more tricky year in China, we think the conditions for our business will be better in 2014, partly because our markets will be better, but partly through some of the things that we're doing. China is still a great source of opportunity to our company. Likewise, India. Last year, our business grew in India 18%, and I think the prospects for our Indian business are also very good.
The company has full exposure to all the major emerging markets around the world. We continue to invest substantially in our core brands. We have been putting more or less the same percentage of investment into marketing, as I explained. I hope to give you, it's difficult to give you a flavor, but we have some very exciting products. The company is very good. We have a team of very good people who can create exciting, innovative, and successful products. It's our ability to find those people and retain them that is the key to a lot of our success. High Sierra and Hartmann will deliver increasing contributions to our business. We mentioned Samsonite RED, but I think we feel the company's got very interesting prospects to move into the mid-low travel area.
The logistics, the sourcing, we can all handle, and there's a very valuable market there that's occupied by a plethora of very forgettable local brands in many markets. There's a big opportunity there in value terms. Handbags. Not luxury handbags, but if you take out the five or six big luxury players in the handbag market, there's a huge opportunity there. We are currently studying that. As I mentioned, M&A, we've got some very attractive adjacent categories. The market for mobile device protection, business casual camera bags, very fragmented market. Outdoor and leisure, huge opportunity for us. As I mentioned, handbags. We have been quite disappointed that we haven't been able to find or conclude transactions during 2013. Our results were achieved in spite of that. Acquisitions are a bit like London buses. They tend to come along in threes.
Those of you who've lived in London will know the problem. We think we've got some much better chances of concluding deals in 2014. The company invests an enormous amount of time and effort in studying and searching out acquisitions. We will be very disappointed if we are not able to press on the accelerator there. As I have mentioned, in spite of the increased payout, we generate a lot of cash, and we have, I think, really the capability to borrow and create a war chest of up to around $1 billion to put into suitable acquisitions. We're not all going to spend that at once. The opportunity to really expand our business is there. I think that we have in front of us a goal now of trying to double the size of our company in the next four to five years.
I think that's eminently achievable through the organic growth prospects we have and also through acquisition. The man who will play a very important part in achieving that, of course, is my colleague here, Ramesh, who we have promoted to become Chief Operating Officer, and there could not be a finer person to do that job. I'm not leaving the business. I will continue as Chairman and CEO. Ramesh here will look after the day-to-day operations of the business. We have promoted Leo Suh, who's been incredibly successful in our Korean business, to run most of Asia. Ramesh will continue to look after the key Chinese market. Very important that we continue to evolve as a business in terms of succession. As I said, I'd just like to stress that I'm not going anywhere. Some of you may regard that as a problem, but I am not going anywhere.
The nice thing about our business, just to conclude, is that there is a very strong sense of teamwork across the company and nobody can run a decentralized business like ours without this degree of cooperation and very close camaraderie. We see this as slightly different roles for people, but same business and same fantastic opportunities. With that, I'd like to throw the floor open to questions. Thank you very much indeed.
Okay. Erwan. In front.
Thank you, and congratulations. You mentioned you can look at double-digit organic sales growth, and EBITDA growth, in terms of percentage growth, 15%-ish. I suspect that's solid for this year. In terms of the margin profile, this is a question for Kyle, this would actually mean further margin expansion. Should we expect this to come mostly from SG&A leverage like it was last year? Where do you see the gross margin going to?
Yeah, it's really the same story. Our view is, we'll maintain the gross margin. Actually, my view is gross margin probably will creep up this year a bit as the mix of the business changes. Last year, we had a very strong U.S. growth profile, and that's a lower margin region for us. I think we'll get a little bit of upside in the gross margin this year. Largely leveraging our fixed cost or SG&A fixed cost. We continue not to have to add heavily in the fixed cost components of the business to do what we're doing. We'll get that same kind of 20 basis points, 40 basis points lift in EBITDA margin is how we're looking at it.
Okay. Second question for Ramesh. Looking at the outlook for China, when do you see a tipping point or, for example, when do you see the headwinds on B2B moderating? Hopefully a bit of a pickup in growth for that market.
It's already been seen, quite honestly. For us, B2B, there are multiple components. One big component is airlines. They stop to buy new bags for their crew and things like that, which is a big component of the business. The banks stop to do redemption schemes and things like that. A lot of it is already coming back. We have already a few businesses coming back to us. Some of them were already there, but they were just stalled. They were not accepting deliveries. I believe that quite a lot of it would be already back in second half of this year. We'll see, we're already executing a few orders in the second quarter of this year.
Last one for Tim. I think you said in terms of cash, you can have dividend and M&As, not either/or.
Yeah.
You presented a few opportunities in terms of the types of sub-segments. Is there any particular region you're looking at or is that irrelevant? Because obviously Samsonite RED, for example, is a good example of how Korean influences the rest of Asia. Are you focusing on a particular market where you want to buy a brand and then globalize it, if I could say?
I think we see opportunities now not just coming out of America and Europe, but also Asia. Korea and Japan in particular. I think this is a trend for the future, that the opportunity to build brands is now not just simply taking something that's big in America and setting up lots of points of sale. There are actually some brands with real critical mass in Asia which can be moved, particularly into the Chinese market, where there remains a huge opportunity, I think, for the right brand. We're looking everywhere is the answer to the question.
Just last one, and I'll shut up. With the sort of firepower, how much can you spend on M&A?
Well—
Or are you willing to spend?
As I mentioned, if you look at what I would regard as a sensible level of gearing, and here I think we're talking a couple of times EBITDA—
2.5x .
—2.5x , something like that. Plus the cash that we generate, you come to a figure of around $1 billion.
Yes. Erica?
Thank you. A couple of questions. The first one's also on margin. Assuming that you do, let's say three acquisitions this year, how do you see the trade-off or potential trade-off between having much stronger top-line growth and also the need to invest for these additional brands? What is the trade-off between sales and margins? That's my first question.
Yeah. I'll use Hartmann and High Sierra as an example. We're investing in Hartmann High Sierra quite heavily in 2013 to reposition those businesses, revamp the Hartmann product line fully for U.S. Develop it for Asia. A lot of exciting stuff. Investing in High Sierra the same way. You don't see any real impact to our margins. There is, as you would expect, initial investment period. The types of deals we're looking at are of a scale that they just get lost in our numbers. We've not factored in margin deterioration because of deals.
I would say High Sierra, which is probably the most organized in the U.S. at the moment, Hartmann, we're still revamping and getting it ready for a real successful launch. Those margins are right in line generally with our U.S. business. We're able to bring it, with t he synergies we get from some cost savings, because we expect to get some cost savings, we're able to take some of that and plow it back into advertising for these brands. We're able to get both of that and continue to maintain the margins for the business, so we feel fine for it.
At a net income level. Because we have cash on the balance sheets, and we will generate cash in the course of this year, I think the first sort of $200 million, $250 million of spend will effectively be without any interest costs. Whatever we acquire tends to be directly accretive.
Yeah.
Just a quick reminder, the model is very much to take in brands, make the savings in the back office, and then start to build out those brands. Part of the reason we've seen less impact on margins is really because we've taken some savings out of the business as well as invested in those businesses.
Yep.
Another question is, in 2013, just like the year before, you've to deal with quite a number of different Forex fluctuations. Can you just share with us what you've learned? In markets where you're seeing pretty significant deflation, like India or Japan, you've taken prices up, I would say multiple times. Do you see that being effective? Going forward, in that kind of scenario, what kind of strategy will you adopt?
Well, I think, when it comes to currency movements, the euro is still the most dominant currency. There we tend to have a policy of covering forward progressively. That has the impact of deferring whatever movement there is, but it gives us a chance to plan. When there has been depreciation against the dollar, we have managed to raise prices because all of our industry has the same kind of issues. When it comes to individual markets, I think we have raised prices in Japan, because again, the vast majority of the luggage market in Japan is imported. I think in general terms, occasionally, this can help us to set higher price levels. Of course, there isn't a similar ratchet mechanism when currencies go in the other direction. It can have a positive effect. I don't worry about our ability to manage our margins around currency movements.
As long as they're not super extreme, I think the experience of the last three or four years has shown that we can manage that from a margin perspective.
Thank you.
Yes. Aaron Fischer in front.
Yeah, I guess your industry is quite fragmented, so it's sometimes hard for us to understand what's happening with some of your competitors, particularly because a lot of the companies are quite small, and they're private companies. Could you provide some comments in terms of what's happening, or is anything interesting happening with some of your competitors across different markets and whether it's some of your competitors have to compete more on price because you've been investing so much in branding and also on the product side? Any comment about your competitors?
Well, I think we face a range of different competitors. There are very few global competitors to our brand. One company that is doing well is RIMOWA at the top end of the market. They have a niche product. I think they're enjoying considerable success with Chinese tourists. It is a one product brand, and therefore, I think it has some constraints. If we look at America, I think we have taken share from a lot of people. I think our competitors remain in the game because there is still a big enough market to support them. I know that some of our competitors have suffered quite a lot in the American market. In Europe, we face a lot of local brands, some of whom are doing okay. Others have lost market share. In Asia again.
It's about the same. It is not only our ability to invest in the brand in terms of advertising. I think what makes us stronger is our ability to develop new products. We are developing products across the globe. We have design centers in Milan, in Mansfield, in Boston, in Tokyo, in Seoul. This whole plethora of products, so new idea which are getting developed, is becoming available to our markets all over the world. That is really the biggest competitive advantage. If I ask our colleague in the U.S., what allowed us to grow at this humongous pace when the market otherwise haven't grown? We have taken share from everybody. Primarily it is because we are able to create more winning products.
As Tim was saying earlier, we have this supply team which we can go out and source and distribute and manage the logistics in a far more efficient manner than anybody else. All that put together gives us the tremendous competitive advantage. That's what we intend to continue to leverage going forward. Also this whole merger acquisition is also primarily we are basing on that we would be looking at riding on this machine that we have now with Samsonite to reach out to the market.
I think the other point to make, the other brand of significance is TUMI. Their strategy is very much retail rollout strategy. I think, again, one of the strengths of our business is that we're able to adapt our distribution strategy to different territories that we operate in. Retail expansion is fine when everything is going well, but there's quite a strong whiplash effect if markets tail off. You will have seen quite a lot of closures of stores of companies that have ventured into some of the markets in China.
My feeling is that we've got a very flexible strategy in terms of distribution, execution, and in terms of products too, which will serve us very well. Last point to make is we're experimenting with retail concepts all the time. One of the other positives for us is that we are not stuck with a mono-brand retail concept. We have all sorts of different fascias that we can work with.
Okay. One question from Josh.
Yeah. Morning, guys. Actually, two questions, if I may.
Sure.
First one is a numbers question, just on, Tim, what you said about still quite a bit of confidence in double-digit organic growth this year. I'm curious as to whether you can help us maybe break it up into the building blocks, especially in the U.S. You have been guiding to the market that eventually you're going to slow down to single digit. What kind of U.S. organic growth rate is in your double-digit growth rate? In Europe, just to clarify, is that in constant currency growth or the double digits after factoring the FX gains? A little bit related to that, then it's a unit versus perhaps, interestingly, you talked about the units of the whole Samsonite company. How much do you think the unit will grow this year?
A little bit related to that is on the margins, because I would imagine this year the dynamics is still American Tourister growing faster. In general, my perception is that that brand might still have a little bit lower EBITDA. It's not a margin-accretive brand in a big way. If that brand is growing faster, how do you manage to make the whole business more margin accretive?
I think, we certainly expect a different pattern of growth this year from last year. It's hard for me to bang in precise numbers, Josh, but I think you're right. America is not going to be a double-digit market this year. We will perform in line with the travel market overall and probably a little better. I think that Asia will have a stronger year this year than last year. Given that Asia is our biggest region, that makes quite a big difference. Europe will have a better year in 2014. The macro picture in Europe, it's rather better. I would say we are optimistic about doing double digits in euros mainly. I think the outlook for the euro seems to be okay this year.
Latin America, again, because of the steps we took last year, I think will make a bigger contribution to the profit of the business in 2014. Weigh all of those things up and balance them out, we certainly feel confident that double-digit growth is achievable in aggregate, although we're never quite sure where it comes from. American Tourister is a mixture of things. On the one hand, we have improved the margin slightly on American Tourister, so it isn't quite so dilutive. However, we tend to do a lot of American Tourister business in Asia.
Asia tends to earn a better margin overall, so that tends to pull the margin up. If I look at our overall gross margin, I feel it will probably stabilize is the best kind of feel I think we have for that in the future. Units, Josh, I don't have any meaningful data on units. We do focus very heavily on value and not units. If we have more time, I'm sure we can go away and do a bit more analysis.
Yeah. All I would say is American Tourister mix of growth will be the same. When you think about price points, large part of that growth is units because American Tourister. On the ASP, same as last year and the year before. It's a unit growth story because the price points in American Tourister are a bit lower, right?
Thanks. The second question is just on M&A, the synergies you can extract. I think we are now more than a year and a half into the full integration of the two brands we acquired in 2012. Wondering, Tim, if you can share with us the lessons, the insights you've probably picked up in the last six, nine months. When you look at acquisitions today, the new things you can buy, how differently you can approach them, maybe perhaps how much more quickly you can—
Yeah.
—integrate these businesses.
Well, I think we've certainly seen that we can fully integrate small companies. The SAP system that we operate, the warehouse capacity that we have, allows us to do that, and we did it actually very quickly in both Hartmann, in the case of Hartmann and High Sierra. The area that is most demanding, actually, is to make sure that we retain all of the key relationships around the sales and marketing of the product, which is very important if you have a small business. We've certainly learnt a few things there.
I think my view now and the view of the management team in America is that we've got very good people running our High Sierra business. It took us a bit of time to sort that out. The Hartmann business, on the other hand, has been fairly straightforward. We completely took out the structure and in fact, most of the management have really just fully integrated it into our business. It takes time to sort out product ranges.
I think our take is that restructuring-wise, we've done a pretty good job. We know how to do that. We can do that with other businesses. All of the efforts, when you make acquisitions, have to go into managing the top line of the business, especially relationships with key accounts, and especially making sure you retain key people. The other thing that I think is clear is that it does take often a little time to adapt product ranges from Europe or America for Asia. The basic rationale, and I do see brand acquisitions as a medium-term venture. I don't like to see acquisitions which are dilutive, but we are patient in terms of delivering benefits to the business. All of the logic there is absolutely proven, I think, to be correct, and it makes us very confident that we can find other businesses to add on to the core.
Great. Thank you very much. We have run grossly over time, so I'm afraid we will have to stop today. Thank you very much for coming. Thank you.
Thank you.
Thank s.