The Thule Group Year End Report. My name is Talas. I'll be the coordinator for today's conference. I would now like to hand over to Magnus Verlander to begin.
Thank you. Good morning, everybody, and welcome to our year end report for 2017. And it's a report I'm very happy to give as we conclude a fantastic year. If we go to the first page, we can look at a summary of the smallest quarter for the year in Q4 of 2017. And good to see is that we continued a good performance in the business also in this smaller quarter.
We grew our net sales to $1,600,000,000 and that meant that we had a $6,510,000 currency adjusted growth, So that is nice to see. We also had a positive continuous development of our EBIT, We delivered SEK 65,000,000 and that was a meant that we also partially a small improvement on our underlying EBIT margin as this quarter is the quarter where we, every year, spend a lot of money in product development efforts versus a relatively smaller revenue quarter. Net income for the business was $40,000,000 negative, and Leonard will come back to that when we talk about some of the things that have happened during the quarter. But overall, a strong cash flow in the quarter and also as the Board has proposed an ordinary dividend of SEK 6 per share versus the SEK 3.40 last year and can take that point directly since it's here on the first page. I think a key message to be delivered in how to interpret the proposal of the significant raise of the ordinary dividend is simply that we as management are very convinced of the company's ability in this year and in the coming years to deliver a very strong operational cash flow.
And considering that and considering our strong financial position where we feel comfortable with the ability with our current leverage target, but also, if needed, for a bigger acquisition, borrow money for that. We know that we can drive the business and do the necessary investment on top of that doing smaller M and A should they arise and still be a strong dividend yielding company. So this is a directional push on higher dividends as ordinary dividends going forward. If we then look at what the last quarter delivered for the full year, it is, as I said, a fantastic year. If we look at the results, we then grew our top line with 9.5%.
That includes a little bit of the acquisition growth as we acquired the YET company in mid-twenty 16, so pure organic constant currency growth was 8.8%, but still a 10.7% reported top line growth and a 13.3% constant currency EBIT growth. So that meant that we picked up 6% to 18.2%, so 0.6% EBIT margin improvement. So 18% to 0.2% EBIT margin, which brings us in a good direction towards our long term goal of 2020. I'm especially happy to note that and comment on that we are achieving this while we are in a very aggressive investment period in terms of product development efforts for future growth. So it feels very strong as a platform to build on all that margin that we delivered.
Looking then on some of the key events that happened in last quarter. I think important to note is that although the growth in region Americas was lower than it's been in the strongly performing region Europe and rest of the world, we had the 4th quarter in a row with growth in region Americas. And that's, of course, important looking going forward that we continue to see Region Americas contributing to the top line growth of the company. Region Europe and Rest of World delivered a very strong growth also in quarter 4, leading the region with a 12.7% constant currency growth over the year. Extremely strong in Europe and rest of the world.
I've already mentioned the fact as presented also on the Capital Markets Day in September last year that we are in the most intensive period ever in the company in terms of product development push. And the reason for that, as communicated in previous presentations and in the Capital Markets Day is that on top of the growth that we are driving in our traditional categories, sporting cargo carriers and RV products, where we always will spend a lot of money on delivering new exciting products to market. We are currently spending a lot of money on several parallel development projects in the new categories, specifically targeting strollers and luggage. And as those 2 categories, strollers and luggage, are relatively turnover wise small at the moment, that means that there is a potential push that is significant. And as those categories will grow in 'nineteen and 'twenty, I am confident that we will go back.
I think we are a few slides too fast forward here, so we can move back one slide, operator. Then what we also have done is that our new Polish plant, which you saw on one of the images on Slide 4 in the presentation, is opened was opened in October last year, and we are ramping up as we speak in the Polish plant. And that plant now will be then both doing some of the traditional sport and cargo carrier products, so a number of bike carriers are being assembled there already. But we have also moved into assembling our some of our juvenile products, so things like child bite seats. And it will be the assembly plant for our new stroller that is hitting the market in the autumn of 2018.
Another positive thing to note is that we finally reached a settlement in the court with the German tax authorities for 2 audits that were carried out in previous years. This has been something that has been on our books already since the prospectus ahead of our IPO, and it's been in every annual report. So therefore, it is very positive to note that finally, there has been a conclusion and final closing of that. And what I was very positive to note is also that from an original request of more than €27,000,000 the settlement in the end was €3,000,000 And considering that we had already accrued for a €7,000,000 it means we have a positive outcome for our results, thanks to that closing of that tax. We've already also sent out a press release in regards to what the effects of our company was on the U.
S. Tax reform, and we've noted a negative impact of US13.4 million dollars and that is the write down of our deferred tax asset. And as Leonard will come back to, it does have long term small positive effect on our tax situation. That's all. So once again, summarizing and looking at the sales by region, you can say that region Europe and Rest of World have delivered a very strong year, and we have felt that we have seen a strong performance actually across all the countries, where both mature markets, so markets like Central Europe with Germany and Benelux, Nordics and the U.
K, but also in some of the emerging markets where we had very strong performance in Eastern Europe and also in some Southeast Asia and in countries like South Africa. In Region Americas, we grew for the Q4 in a row, as I mentioned. And for the full year, our growth has been 3.4% currency adjusted. And that means a solid performance, although not at the level of Europe and Rest of World. We are also there growing actually in all the subregions.
So we have seen growth in Latin America as well as U. S. And and Canada. So on a positive trend, although not as strong as for Europe and rest of the world. If we then look at the page where you can see our product categories doing how they are doing in the various regions, So Slide 6.
You can see that we continue to deliver a very strong performance in sport and cargo carriers. So in sport and cargo carriers, which is still twothree of our business, it was 65% actually in 2017. We have a similar size of this business in both regions, so around twothree both in Europe and rest of the world and in region Americas. And as you can see, we grew 6.4%. And with a global market leading position, it is us driving the entire category's growth.
I'm therefore very happy to see how strong we are. The 4% growth in the region Americas was met despite the fact that we do have a small business with some accessories to pickup trucks that we have decided from a strategic point of view to not focus on as it's a lower margin business than where we've seen some declines. So overall, it's very strong. In RV Products, we have a big business in Europe and a very small business in the region Americas, and we have seen a very strong growth where we are beating the market growth, and that's very nice to see. And in juvenile active with kids products, we have seen a very strong growth in poultry.
So the sole underperforming category is packs, packs and luggage, where we, despite growth of some of the new luggage and sports packs, have not been able to compensate for some of the legacy NOE decline. What is good to note though is that the decline is significantly smaller than it's been in the previous year, and I see a light at the end of the tunnel finding that gap.
So if you look
a little bit deeper into sport and cargo carriers and also look a bit forward on what we see to happen on Slide 7. Focus has been and will continue to be to grow our market leading position. And the way we are doing that is, yes, successful product launches, it is crucial in this type of business, and we are definitely out innovating our competition in this category as we should as the undisputed global marketplace. It is also about a strong delivery. We've mentioned a number of times, and I think all of you that follow retailers around the world know that retail is pushing brands to be taking a bigger responsibility on what can be done for them to have an efficient supply chain and them not having so many things to start.
That puts pressure on a company to deliver well. We are doing that in a very cost efficient and very efficient way. And then on top of that, you want to attract consumers to the stores and you want to make life easier both for onliners and physical stores in terms of an improved retail support. And we have, during the year, rolled out a number of improved tools for retail, both on liners and brick and mortar. We had some very big launches, some big products hitting in 'seventeen that helped the result.
And 2 that I've mentioned in a few times in quarterly reports are worth mentioning was the award winning Thule ISiPOLD XT. It's a fantastic towbar mounted by carrier, one that I have myself, so I can strongly recommend it. And it is the TeleMotion XT, a modern roof box family with a design language, but also with technical solutions that fit the modern. So overall, a strong performance. And although it might seem boring, it's very simple to say what we will do in 2018.
It's just more of the same. We will continue to push with some great new products hitting the market this year. We are having a very big focus on our delivery performance, and we are tweaking and helping retailers even more on how we can attract consumers to their stores and how we can make it easier for their kid on the floor to sell our product. If we take the next category, packs, bags and luggage, the category where we did not grow in 'seventeen but where we definitely want to focus and ensure we drive growth as a category in 'eighteen and beyond, you can really say that, that category has 4 subsets. We have an old legacy business where there are CD wallets, camera bags, phone cases, other things, which we are not focusing on as much going forward.
And in that business, we also group together some OE business, where we are a sub supplier of making simple cases for, for example, medical devices. So similar to the way you bring your headsets with you in a little nice case, if you have a small medical device, a breathing apparatus or something like that, you will also bring that in a small case. That business is not our focus, and we will be focusing more on the EBIT contribution of those businesses rather than volume growth, plus that we have a market for some of those categories that definitely is declining. So that will continue to decline, and we need to then compensate that with the 3 other categories. And in 2 of those, I'm very happy with the results in Zarantined.
I'm very happy with our successful launch with the TILUSA Terra collection of luggage. It's only our first really serious step into luggage, but there will be more to come. And it's, of course, important that your first step is successful, so you don't stumble on step 1. And we did have a very solid success around the world with TASASAPERA, which means we have a base to continue to build on. I'm also very happy with what we've done in sport and outdoor packs, where we are gaining fast growth and credibility, thanks to some successful launches of new tech packs and new sports transport cases.
The product category or subcategory that I'm least satisfied with in the entire group is the smaller everyday bags. So here we talk about a small backpack that a university student goes back to campus with or the business bag that you travel with back and forth to daily work. Here, we are doing well. We are growing, but not as much as we wanted and not as much as we aspire to do going forward. So this is a core capture for us to drive more growth going forward.
We do know it's very competitive, but we think with what we are doing in terms of design and in terms of look and feel and in terms of brand credibility that we will be able to see a better growth going forward. If we look at the next category, RV products, it is, of course, easier to have a category like RV products where caravan and camper manufacturers are in a booming market than it is to sell CD wallets. So yes, we are helped by the market that's here. And since we focus on the more premium oriented European market, we look at really how is the market developing for RV products in Europe. And it's been a fantastic year.
If you've been listening to manufacturers like Trigano or sub suppliers to the industry like domestic, you will have been hearing also on their quarterly reports over the year that it's been fantastic strong year. Most people say that the market has grown somewhere between 14% to 16%, so let's say 16% market growth in Europe. And good to see then is that we are generating 27% growth, and that is, of course, by us not only then growing with the market, but actually taking significant market share. And the way we're doing that is very similar to what we do in sporting car repairs. We simply have better products than competition.
But on top of that, we've been able to cope with a volume uplift and still being able to deliver to organizations. And I have to say a lot of kudos for our Belgium based team on being able to cope with that fantastic growth and still have such a good delivery performance. We have a very, very small business in the region Americas, as historically, the market there has been targeted on much, much lower end type of products, where it's more difficult to make the necessary margins. But we have had some success on a very small base with some niche products in what we hope will be slowly but surely a growing more premium market also in the region. But it is Europe that is the focus of CapEx.
And if we look at it for 2018 and beyond, this is a market, of course, where there is, as we've said, some cyclicality historically. We do not think that 2018 will be as strong as 'seventeen, but we feel very 2018. So might not be as hot as in 'seventeen, but it's definitely not getting cold either. It's a market with a good momentum, and we are convinced that we will continue to out innovate competition and be able to also cope with those delivery demands that the growth puts. So looking forward to another strong year for RV products.
When we look then at the lab category, but definitely not the least, if you look at opportunity going forward, active with kits, we did in 2017 have some fantastic product launches. We updated our multi sport bike trailer category, the Thistle Chariots, and we launched new child bike seats with the Thistle Yetnek. Both of those two products became really significant award winners. But not only award winners in winning the Oscars of product design like the If Gold Award or the Red Dot Best of the Best, but really also becoming the winners among consumers. If you look at the ratings, the reviews and the type of feedback we're getting on these products, it's been fantastic throughout the year.
So a very strong driven launch of products in these new things helps us to grow in those 2 steps. In the Strelos category, which is long term the biggest opportunity due to its size of market. We did not launch any new product in 2017. In fact, we're launching 2 new products in 2018. But still, we grew very well with the 1st generation target Australoprolol Irvin Fly.
And the reason for that, a product that now has been in the market for 3 years, has been it's been gaining credibility and momentum as it's been getting great reviews around the world and we're getting more and more places. When we look at 2018, the big, big focus for us in this category is 2 big stroller launches. We now have an incredibly fresh portfolio in child bike trailers and the world's best portfolio in child bike seats. So we are sitting very nicely there when it comes to product, and there is a continued growth of that product categories driven by those products. But within strollers, we are launching 2 new collections, a second generation updated Thule Urban Glide 2, which has already hit the market since some weeks ago and our first 4 wheel stroller launch in the autumn of 2018 with the Tesla's Leak.
So limited impact on Tesla's Leak in terms of money this year, but of course, a key opportunity going into 'nineteen and beyond on the platform that creates growth. So a very exciting year within strollers for us in 2018 to continue to broaden our base and also drive future revenue. With this, I will leave it to Lena to go through some of the more details in the financials.
Thank you very much, Magnus. So if we look at Slide 11, the income statement, I will mention some highlights. If we look at our gross margins, year to date, we ended at 41.2% versus the prior year of 41.4%. Percent. Decline is due to unfavorable currency development, actually minus 0.3 points.
Then we have negative raw materials prices that we have been able to compensate by positive product and customer mix combined with our normal price increase we are doing within Sports and Cargo Carriers. If we look at our SG and A costs, we see that we have been able to maintain our administration expenses flat. And as you can see, also there is a quite dramatic increase in our selling expenses, which consists of both sales and marketing and product development, which is in line with what we have been communicating that we are driving for future sales growth. So in line with what we have said and happy to see that we have kept the administration costs very flat. The financial net was minus SEK 14,000,000 in the quarter versus prior year, minus SEK 9,000,000 year to date, minus SEK 52,000,000 versus minus SEK 36,000,000 When it comes to borrowing costs, actually no big difference between the years.
The only difference between the 2 years are that in 2017, we had a negative FX effect on revaluation of our FX accounts for loans and cash in the local entities, which is then the big driver for the difference between the year. As Magnus mentioned, we have had 2 exceptional big tax items in the quarter. So the U. S. Tax reform, where the changed federal tax rate caused the right harm on our deferred tax assets, affected us negatively SEK 114,000,000 there.
Going forward, we anticipate that this, of course, should be good for us because what used to be around 35% corporate tax in U. S. Will now be around 25% for us, including some state taxes. However, and I can anticipate this question, we have a guidance of effective tax rate between 22% to 25% since we came public, and we have been around 24%, 25% since then. We still believe that we will be in that range from 2% to 25%, hopefully slightly below where we are today, but we will wait and see for that.
Secondly, very happy that finally, after more than 5 years of work, we settled the German tax case with a fantastic outcome. So compared to what we have accrued for in our books over the years, the €7,000,000 and the settlement ended at €3,000,000 We had a positive income in this quarter of €4,000,000 So if we exclude those 2 one off items, the effective tax rate in 2017 was 24.4%. If we then look at Slide 12, the operating working capital and operational cash flow. 2017, another year where we managed operating working capital very well in spite of increased sales and expanding into new product categories, we've maintained very good delivery performance. At the end of this year, we ended with approximately SEK 900,000,000 tying up in working capital, which is 15% of the last 12 months of sales versus 16.7% prior year.
So good improvement in spite overall performance improvement in the company. So the good working capital combination with a good financial performance, ended the year with an operational cash flow of SEK 988,000,000. Prior year was SEK 929,000,000, which corresponds to a cash conversion of 87%. Our CapEx this year ended at SEK 144,000,000, which is 2.5% in relation to our sales. And the biggest single item was the building of our 2nd assembly plant in Poland.
With that, I hand it back to you, Magnus, for the target session.
Thanks, Yanan. Yes, if we look at the 4 targets as updated at the Capital Markets Day last autumn, we kept the organic sales growth target of at least 5% every year in constant currency, pure organic growth, excluding any NDA. And delivering 8.7% means that we're significantly overachieving on that one. And of course, that's a very positive thing to note, strong year. The second target, which we raised at the Capital Markets Day from the previous target when we entered 2017 was 17%.
But we felt with the strong performance and our plans going forward that it was time to have a more ambitious long term growth target there. Our underlying EBIT margin target was set to above 20%. We are now at 18.2%. So we are performing very well and on a good path going towards our long term growth long term EBIT target. We also gave a new range for our leverage, 1.5x to 2.5x EBITDA.
We are now at 1.5 times. So we feel very solid in our financial setup looking forward. And then finally, we do have a dividend policy that at least 50% of the net income should be given out as ordinary dividend every year. And with the proposal from the Board of SEK 6 per share, that means we will be at 87%. And as I mentioned before, this is related to the fact that management and the Board feel very comfortable with this company's ability to generate significant cash going forward and considering leverage targets as we have combined with future growth aspirations, we feel that we will be able to drive the full agenda, including M and A, also with larger ordinary dividends moving forward.
Finally then, because I know you are all more keen on what we see coming forward than what we've done. So what's our view on looking forward? Yes. We are looking, which is very nice to be able to say, for the most exciting year ever in 20 18. I've now been in this company for 12 years and being the CEO for NASDAQ almost 9, and I've been able to say that every year.
And my strong ambition is that we will be doing that as long as I'm here definitely. And it's true. 2018 is a very exciting year. One thing that is key is that strategy has worked for us. And when a strategy works, you shouldn't change it.
There is no need to change something if it's not broken. And that strategy is pretty simple. It's to drive the profitable organic sales growth via great product. And to do that, as we've mentioned a few times, we are spending more money than ever to ensure that we truly deliver some fantastic, great products, not only 2018, but more importantly, also in the following years for 2019 2020. Secondly, it is to continuously strengthen our fantastic Tesla brand, which today is now 79% of the Thule Group's sale in 2017.
And it has its fantastic multi bring your life, which we are trying to load every time into that it's more than the product. It is what those products do for you when you buy things from them. Thirdly, we have communicated as of last year that we are having a long term ambition, and we will not be able to beat that only in 1 year in 'eighteen, but we do have a very clear long term ambition be a very serious contender for the podium in the large categories of Strollers' luggage. And as I said, that will take many years to do, but we do need take steps in the right direction for 2018, which I'm convinced we will. And then finally, the strategy builds on the utilization of a very strong back end organization to generate very cost efficient growth.
And you heard Leonard mentioning not needing to increase admin costs at all in a year with fantastic top line growth we have is an example of that. And other examples is the way we cost efficiently have been able to handle without issues the volume growth in terms of supply chain and distribution setup.
So if you look at
it, the product portfolio and development push we're doing is meaning that we have several large projects going on, many major launches happening within the traditional sporting cargo carriers in 'nineteen. I'm not going to tell you exactly what they are because we haven't told retailers yet, but it will be some very big improvements coming in our portfolio 'nineteen in that traditional category. And that means we will be peaking at the spend of around 6% of sales during this year, which we then forecast that in 'nineteen and 'twenty will slowly reduce down a little bit, although not never becoming too small because we will generate future growth. I mentioned the supply chain. I'm extremely proud of what our supply chain team has been able to do over the last few years.
We have changed every single distribution center in the world. We've built a new Polish assembly plant. We have done some major changes and set up changes to our Belgium, UK and Swedish plants, and we're doing and we built a new Bruce box plant in the U. S. While doing all of those things, we have delivered to our customers on time until despite significant volume growth.
That's a kudos for them being able to really deliver on both aspects of building for the future and delivering for the present. So well done there, definitely from the team. With those changes we have done over the last few years with new distribution centers more set and ready to handle the demanding retail experience of today with later and later orders, more in pick and pack, etcetera. It provides a very solid base for cost efficient volume growth going forward. So it doesn't mean we have done everything.
We're continuing to invest in our distribution centers and tweaking them and improving, but now we have a very, very good platform to do those improvements and tweaks from. And then last but not least, and what we're doing for our retailers is we are spending significant efforts in both improving the online sales tools in making our toolkit.com and the various B2B tools we're providing even easier to use and better for them to create a cost efficient sales growth for them as retailers. And we also, as of Q4 of last year, started rolling out a completely new concept and rejuvenated concept for brick and mortar retails that has already seen a number of mono brand shops opened by partners around the world in the new concept. So we feel very good on all of those aspects. And all of that really leads to that we feel very comfortable with that we will continue to generate a very strong cash generation.
That will allow us to continue to look at M and A. So I can anticipate one question I'm sure I will get. Yes, we are looking at a number of companies and have looked at a number of companies, and we will continue to do so. And no, if we would have had any big news to update you, we would have already done it. With that, I leave it for questions and
Magnus, your first question today comes from Gustav Sandstrom from FCP. Gustav, your line is open. Please go ahead.
Thank you, operator. Good morning, everyone. My first question would be regarding the dividend. Net debt is roughly in line with last year, so lower in terms looking in relation to EBITDA and cash flow metrics as you stated is up. And perhaps one could argue that the business today is a bit more stable than it was a year ago given the recent divestitures.
So even so, total dividends are down, maybe ordinary or special, but total dividends are down year over year. So my question would be, is this a more conservative view on the balance sheet, which can be connected to your change in your debt target from the Board? Or is it you would assume cash flow metrics to deteriorate or are you closer to perhaps do something more with it on the M and A side or what to read into this, please?
Yes. I think you should read in 2 things. We did a very large extraordinary dividend last year, and that's, of course, not something that the whole name is extraordinary. So what we're looking at is, you're right, we are doing at the moment same time, we want to ensure that we have the right type of debt structure going forward, in line also a little bit with the direction of what we have set the leverage targets to be. And secondly, we do want to have dry powder in our books, so to speak, to be able to pursue an interesting M and A that should appear.
So what we're doing is really setting more of a long term direction of saying, yes, this company will be a very large dividend yielder in terms of ordinary dividends going forward and saving anything that would have been extraordinary to ensure that we can do the refining negotiations on debt structure and to have dry powder for potential M and A.
Okay. And regarding M and A, I heard you underlining that you wouldn't comment specifically. But in general terms, there's been some notable competitors within the baby stroller market for sale. Would you consider, on a theoretical level, also bigger targets to sort of accelerate your new market positions within luggage or maybe with strollers? Or are we primarily looking for bolt on smaller scale acquisitions?
Yes. I can say, as we actually did at the Capital Markets Day, there are the 2 categories where we would like and potentially look at the right larger acquisitions are the 2 you mentioned, Sterling and Luggage. And it's not a secret that Bain Capital just recently, Bugaboo. And I can say we were also interested in Bugaboo. That could have been a company due to strong products historically, which could have been interesting potentially to take a bigger step.
But you also have to find a situation where you think the valuation of the company, not just the products that they've been able to launch, is at the right level. And we did not consider it at the right level. So it was not something we would be pursuing at those type of valuations. But otherwise, those two categories, yes. Also a larger one, if it's the right one, not just because we sit on money and there's companies available, but it is a leading brand, a leading position where we could significantly speed up our entry, we would be interested.
Right. Question on gross margin, obviously up in the quarter driven by price mix, by currency headwinds. So would you expect a similar strategy to filter through to improving gross margins also in 2018, be it pricemix? And could you put this in relation to the higher R and D spending? Or what's the bigger effect here going into 2018?
Yes. If we look
at it, we will be potentially, if you would take out product development spend only, we would be deteriorating our EBIT margin. But we are convinced with all the other measures: 1, a sales growth with a very strict and maintained level of spend on admin and on top of that, a positive mix shift of categories with higher margins selling more and categories with lower margins growing less. If you look at our mix split, those are the two factors that are compensating for that additional spend. So I got the question last quarterly, do we report do we expect 'eighteen to be another year with significant EBIT margin pickup? And we said at that time, and I still think that's a valid point to make, it's not the year where we should do a significant margin pickup, but we do not expect our margin to go down.
Right. Final one for me or actually, I did lose my train of thought here. So I'll get back into line. Thank you.
No problem.
Thank you.
Your next question today comes from Soren Hellstrom of Nordea Group. Soren, your line is open. Please go ahead.
Hi, thank you. Yes, I just wanted to see if you can help me maybe understand a little bit how your key product launches have helped you in achieving your organic growth for you, the strong organic growth for you. I'm thinking the easy growth in the Motion XD and also if you can maybe sort of help us understand your new launch kit for this year, how those compare or potentially?
Yes. Avi, you can say in general that if you look at the growth we've generated, there have been a few key launches that drive bigger volumes. And that's partly, of course, some of these are pure new things we do, right? So if you do a total Soltaro luggage and you don't have a luggage replaced, there is no cannibalization by 1 in, 1 out. So that, of course, makes a nice boost to the growth of a luggage collection like that when it goes out there.
Then we have categories like the ones I mentioned where we already had the world's best bike carriers, right? So it wasn't like we had a bad bike carrier. We had the world's best and then we've replaced that with an even better one. That's then for impurer growth because that's, of course, some cannibalization, you take away an older model and you add on, you need to then a little bit take that difference away. So you don't get too excited about a volume product that is replacing another volume product.
But generally, why I mentioned the Thalese Sulte XP and the Thalese Build XP is that they clearly have been key contributors to that 8% growth that we saw in Europe and the 4% growth saw in region America. We do need these new products, right? So they're always there every year, but one reason why we were above the 5%, which is, of course, tougher in sport and cargo carriers than in juvenile, in active kids, was that they were very successful this year. They clearly hit the spot. So they've been big contributors.
Those 2 collection to the XB and the Motion XT have been good contributors to that growth. And specifically, if you look at the Thule Chariot, that was a fantastic growth pickup despite once again replacing what was already the world's best. The previous model of Thule Chariot was the world's best bike trailer. But the new one was so much better that it not only found what I would consider normal volume growth, it actually found a juvenile stores. So those 4, if you look at the total, the luggage, the toilet chariot and those 2 working carotaries were strong.
If we look at 2018 and look at what we're seeing, we have 2 that we are extremely excited about. It's the new Thule Urban Glide 2, the new generation, and of course, the Thule Sleep that's coming late last late the year. And we do have inside, as always, in sporting cargo carriers, some really nice, exciting new products. We are getting very positive feedback from retailers where we showed it in the bottom, and they are just about to hit force, most of them, because it's if you look at the porting cargo carrier products, they are coming now in February. The only one already in store is the Thule Urban Glide 2, and I can say, although very early days, it's got a great reception, very, very good feedbacks on sales of the updated refreshed shoulder to Leroy and Glide 2.
So we step into the year as boring as it might seem like we say every year. We have got a nice permission to play from retail. Now it's going to be up to the consumers if they like it as much as retailers unlike it. So it's early days yet, but it is promising.
Great. I think in the support you also mentioned the contribution from or some contribution from this positive from Eastern Europe and Asia. And just wondering if you can help us to maybe say how much you're safe from those regions or if you think this is something happening here in the market?
Yes. If you look at Europe and rest of the world as a full region growing as much as it did with close to 13% constant currency growth in the region. That's, of course, fantastic. And what we've seen is that higher than that average growth in percentage has been proven in a number of Southeast Asian markets and in Eastern Europe. So those markets are performing very strongly.
Part of that is a general economy situation with more consumers every year in those markets finding that financial situation, but also that spare time desire to go and do things.
And
so I think we are connected to a positive trend. And at the same time, we're also becoming more and more known as a brand as we do other products. It's actually helped in these markets, maybe even more so than in some of the mature markets. Some of the new categories actually helped the traditional categories and brand recognition. That is especially valid for, for example, Southeast Asia, where our luggage collection launch has been extremely successful.
We are getting good traction, which in itself makes the brand more known. So we see I think it's a general market macro that is helping us with more middle income earners in those countries wanting to do these activities. And then we are doing a good job with some of the new listings we're getting with the new right retailers to drive that.
And currently, your last question comes from Peter Reilly of Jefferies. Peter, your line is open. Please go ahead.
Good morning. I've got three questions, please. Maybe if I can start with Sports and Cargo Carriers, very good growth performance in 2017. You can't tell us much currently about the new products coming in 2018, but they haven't been launched yet. But you obviously had 2 very successful launches last year.
On a relative basis, is this going to be a slightly slower year than last year because it was such a big year for launches this year? Or are you just as excited about '18 as you are as you were about 'seventeen, which obviously turned out very well? And then secondly, I wanted to ask for a bit more color on where you are with the sleek. There were some new comments in the report saying you're recruiting 100 people in Poland, which is quite a lot for a company of your size. And I wonder if that gives us an early detailed or advanced negotiations with retailers about who's going to stock it, what the initial orders are going to be.
And also, hopefully, you've got some idea of whether it's just traditional people who've stocked your more active jogging range or whether it's new retail, it's slightly more mainstream than your current retail channel. So can you help us on those 2? And I'll come back on the 3rd afterwards.
Absolutely. If you take Sport and Cargo Carriers, we did have some very key launches in 'seventeen. There will not be the same amount of high volume new introductions. There's a lot of introductions, but in terms of high volume products, not as many. But I still feel very good about 2018 because if you look at the way we do business in sporting cargo carriers, it's not that we're heavily advertising or promoting anything new.
It is very much a word-of-mouth thing. So what happens is now after having had the, for example, to the Motion XT market for a while, a lot of people have seen it on the parking lot at the ski resorts or on the holiday vacation, and they've liked it and they've heard the good comments about the features of opening, etcetera. And the same applies for some of the other products where often a year number 2 is a very important year for us with big launches. The combination of a year 2 of some big successful launches should spill over into 'eighteen plus a number of more new launches of several different new products, maybe not with the same volume, means that we feel good about also 2018 in porta tower carriers. If you take the Tillerslieg and the Polish factory, I want to point out it's not only Tillerslieg.
We do in the Polish factory. We do do child bike seats, which is growing very nicely for us and some other things that we've moved in there. We do even some model of bike carriers. So all the 100 will not be working with the fleet. But I can also say that we feel very positive about the fact of the listings we've gained because it is not only, which is of course key for us, so a good point, Peter, it was not only the type of players that had been listing a jogging stroller or a multi sport stroller.
This is a product that will also be
listed in a number of
markets with some of the leading stroller retailers, both online and physical stores. So we have some very positive first orders and commitments, so to speak, in terms of what we will be in for Tycho shops when the tools begin. Then doesn't say a lot about volume because then the consumer needs to love the product as well, but it is at least giving us the true opportunity to be in the type of retail outlet where a consumer would want to go if they wanted to buy that type of scrubbers. So that is a positive signal level.
Great. And if I can move on to banks, banks and luggage. It's obviously a small revenue decline is not really the an accurate description because you've got a big revenue decline in the legacy OE business and the strong growth in the newer product areas. And as the legacy gets smaller, the balance shifts. So is 'eighteen a year where you can actually resume organic growth, do you think, in bags, packs and luggage because of the ongoing mix effect?
Or will it still be quite challenging to try and grow that business?
I will be greatly disappointed. I can say that I've said it internally to everybody, I would be hugely disappointed if we don't grow this.
I will look forward to seeing the positive result then. I should as well. Since I was announced as the last person on the queue, maybe I can ask some more questions, if you don't mind. Sure. Coming back to the dividend, I just want to make sure I understand the body language here.
This is effectively you rebasing it to a lower level from which you would hope not to have to reduce it because you couldn't fund even medium sized M and A without having to make change, without having to rebase the dividend back to a lower level. Have I got that right?
The logic is this. I think there is always this classical confusion on what is something you should be able to expect every year to come, which is a little bit the direction you want to do as a company on an ordinary dividend. And then people might speculate that over a few years, if you have a little bit too much and you don't do M and A every few years, but not every year and not every second year, but every now and then, maybe a company, if we should not do the M and A, will have to do also in the future an extraordinary dividend. What we wanted to set as the company has been established on the set as the company has been established on the stock market, we've defined new targets and new leverage targets, is a signal of saying our ordinary dividend level will be higher than it was the last years where it was around SEK 3. So we're really setting a bottom threshold to this business, but beyond saying SEK 6 percent is going forward, you should expect for this company to be giving out at least this type of money.
There might be that in the future, but not every year or every 2nd year. If we do not find the right M and A target, also in the future for extraordinary dividends. But we do want to have that dry powder for the M and A. So with a new leverage structure, a refinancing, this sets a little bit the base for what can be as a high yielding cash generative company.
Okay. And I've got 2 more, if you don't mind. The small everyday packs where you've been disappointed, is have you just basically overpriced them, you think, have been slightly ambitious in a market which is way more price sensitive because the target customers you're talking about are not people for whom price is no object. You're talking about back to college students and so forth. So do you think you've got the pricing wrong?
Is it more just it takes time to establish yourself in the marketplace? And the other last question and then which is sort of related, you talked previously about having some problems with U. S. Retail channels with bankruptcies and bicycles and people moving some of your products off shelves and some of the other sales channels. So you haven't mentioned that this time.
Is your are your U. S. Retail channels more stable now than you've been seeing previously?
Yes. I'll take the last one first since it's pretty straightforward. I feel that U. S. Retail has calmed down a bit.
So we've seen some big wobbles, big shakes. Do you think it's more stable? It's not a booming retail market. I mean, you can follow any companies in the retail industry in the U. S.
And you'll realize it is not. But it is less itchy and there are fewer concerns. So a little bit more stable situation in the U. S. Retail market as we see it, at least the types of retail that we do.
And if you look at your question on the small everyday packs, we're actually doing really well at our higher priced packs. That's where we're seeing the biggest growth. So now I'm not worried about our pricing. We are actually doing well with those. What we're not happy with here in this performance is more some of the older models we've had where we maybe haven't been doing enough tweaks to those because we're not talking about huge innovation, but more small tweaks to keep them interesting at all times, also some of the older case logic bags, for example, in some of the markets.
So I would say it's a combination. It is a challenging retail reality, and there's a lot of brands out there. It's not our pricing. We've actually done really well on our highest priced products. So it's more making sure that portfolio is constantly fresh with the right product.
That's great. I'm sorry for asking so many questions.
No problem. We're happy.
Magnus, that was the last question. So I'll hand back to you.
So thank you very much, everybody, for listening in and listening to us recap a fantastic 2017. As I said, we look forward to an exciting 2018. We hope you are all super active out there in the spring, so you travel around and see and use and buy a lot of the products. So talk to you soon. Thank you.
That does conclude today's call. Thank you for joining and enjoy the rest of your day.