Safilo Group S.p.A (OTCPK:SAFLF) Q4 2018 Results Earnings Conference Call March 13, 2019 1:30 PM ET
Angelo Trocchia – Chief Executive Officer
Gerd Graehsler – Chief Financial Officer
Conference Call Participants
Cedric Rossi – Bryan Garnier
Alberto Checchinato – Fidentiis Equities
Henry Hillgarth – Quaero Capital
Good evening, and welcome to the Safilo Full Year 2018 results. This call may contain forward-looking statements relating to future events and operating economic and financial results for the Safilo Group. Such forecasts, due to their nature, imply a component of risk and uncertainty due to the fact that they depend on the occurrence of certain future events and developments. The actual results may therefore vary, even significantly, to those announced in relation to the multitude of factors.
Today’s participants are Angelo Trocchia, Chief Executive Officer; Gerd Graehsler, Chief Financial Officer; and Barbara Ferrante, Director of Investor Relations.
I would now pass the call over to Mr. Angelo Trocchia, Chief Executive Officer. Mr. Trocchia, you may begin.
Hi, good evening, and thank you for attending today’s conference call on the Safilo 2018 results. As a practice initiated a couple of years ago, at the end of January, we released our full year and fourth quarter preliminary sales, and we also provided a more precise indication on where we expected to close the year in terms of adjusted EBITDA.
Now, before we get into our full set of results, let me briefly summarize the few important things that we have been focusing in the year since when I joined the group in, around end of April. We had quite an intense period in which we have been clearly focusing on few clear priorities. First of all, we have been working on a new plan to turn around the company performance after some difficult years. We have been working on quite a comprehensive refinancing plan to secure the group’s financial structure and keep working and investing on our core business as one of the main player of the industry. The third, we have been focusing strongly on our core business, strengthening our foundation. And last, but not least, in delivering our 2018 results.
In August, we presented the, an update of the company business plan. First of all, resetting the target we had for 2018, which became the base period for a 2-year project to revive top-line growth, and to recover a sustainable level of profitability by 2020. Everything we initiated in the second half of 2018 was done with a clear purpose of exploiting more and better the core strengths of the group.
Our brand portfolio covering all the key segments of this large and attractive industry, our product creation and development skills, and our DNA and historical that goes back to 140 years of manufacturing of very specific and very unique product, on top of our big and important worldwide distribution network. For all these reasons, we immediately and intendedly focused on shaping a new commercial organization in all our key markets: North America, Latin America, APAC, EMEA, bringing back capabilities and leadership from the industry, with the aim of improving our go to market and brand execution. But even more important, try and force to recover a strong customer relationship and really putting, thanks to these experienced people, putting the customer at the heart of what we are doing every day. In the second half of the year, we also paid quite a close attention to all our operations. And with a, and a sharper and deep focus on our investment in need in order to accelerate the alignment of the company cost structure to its current and envisaged scale.
So big focus on any kind of cost in operation in order any kind of cost to really make our P&L as sustainable as possible. At the end of September, we announced a comprehensive refinancing plan consisting of a Biedex.com of capital increase of €150 million, and the new debt refinancing for another €150 million. The latter agreement was executed at the end of October, just before the approval of the capital increase by the extraordinary shareholder meeting and it matures in June 2023, while the Biedex.com capital increase was successfully completed by January 2, this year.
Overall, this was a fundamental project, which, to be honest, we conducted in one of the most difficult years in recent memory for global equity and trading market, but that we will, we have successfully concluded. And also I think, this is a sign of a renewed partnership between Safilo and key leading brand, key leading banks, and reconfirmation of all the support of the group reference shareholders and our significant number of institutional and retail investor who joined the capital increase.
So a very reassuring message that the market has believed, has trust in the capital increase. And I really like, on behalf of Safilo, I want to thank everyone for the clear demonstration of trust in the company’s key objective to improve its performance. The crucial task we had to accomplish in 2018 did not distract us from the day-to-day work and focus on our core business. We remain strongly committed on the renewal of important license agreement. We extended Kate Spade until 2020, we renewed Fossil until 2023, havaianas until 2024, Banana Republic and Tommy Hilfiger until 2025. Tommy Hilfiger is quite important, we are working very well and the results are very, very positive.
So the fact that together we have been extending till 2025 is a strong message for us. And we signed new agreements in December for Missoni and, at the very beginning of this year, for Levi’s. These brands fits in a different way, but it fits perfectly with our portfolio. From our previous collaboration with the brand, we Biedex.com with Missoni the same value of strong design, value and tradition, quality, and the sort of nature out intensity that the Missoni brand take within itself, which I think, is perfectly fitting with what Safilo stands for, Italian company, rooted in the history, which makes the quality, the heart of what we do.
With Levi’s, we have instead an important opportunity to fuel growth in the contemporary segment, by the way, the largest foresight and development potential, and a very appealing further opportunity to grow in key emerging markets such as China. Our 2018 economic results were quite in line with our expectations. We closed the year with net sales of €962.9 million, down 4% at constant exchange rate, mainly driven by the weak performance of sunglasses in the fashion luxury segment, also impacted by the exit of Celine.
On the other hand, the year showed also positive results. The overall good performance of our own brand, driven by Polaroid and Safilo, whilst Muse and Carrera were pretty stable, the first against high comparator and declines in our business. While on the other side, Carrera, we saw the decline of the last few years up to low single digit and if we exclude the sport, which has been the decision to get it out, we had, this is a result which can be judged very positive and very encouraging for where we need to take Carrera. It was then also a very positive year for licensed brand in the contemporary and premium segment. I will not comment more on this, I think that Gerd will come back on this part of the, our portfolio, which is quite an important part. In 2018, we saw the first sign of improvement at operating level with the adjusted EBITDA margin improving to 4.9% of net sales from 4% in 2017, up 15.5%, mainly thanks to the progress in our cost-saving initiatives.
On the other hand, the successful completion by the end of the year of the Biedex.com capital increase allowed us to close the year with a drastic reduction of our group net debt from €131.6 million at the end of 2017 to €32.9 million as of December, 2018.
I stop here, I hand over to Gerd and then I will come back at the end. Thanks.
Thank you, Angelo. So moving to our top-line performance. Full year net sales reached €962.9 million, down 4% at constant exchange rates and 7% at current exchange rates. In the fourth quarter, net sales increased by 1.3% at constant exchange rates and 1.8% at current exchange rates to €249.1 million. As we had already highlighted commenting the third quarter results, in 2018, the product supply business with Kering, which I remind you is entirely booked in Europe, was more heavily faced towards the second half of the year and in the fourth quarter, in particular. Clearly, this gave a positive contribution to the sales of the period, but also dilution effect of the gross margin as we will see later on.
At constant exchange rates, our wholesale business excluding the production business with Kering, was down 4.9% in the year and 3.3% in the fourth quarter. These latter results are slightly better than what we communicated in our preliminary sales as we more precisely allocated the impacts of IFRS 15 on the base periods. Adding on what Angelo has just commented and with reference to our core wholesale business, I would like to highlight the good performance recorded in the year by our prescription frames business, up mid-single digits at constant exchange rates thanks to round of broad-based brand improvement driven by some of our key licenses, namely Tommy Hilfiger, Hugo Boss, and Kate Spade, our proprietary brand Safilo, but also by the positive performance of Dior optical collections within our fashion luxury portfolio.
I’d also like to add that half of the decline we reported in the sunglass business was explained by Celine in the base period, net of the new Moschino and rag & bone business in 2018. By geographical area. In Europe, full year net sales were eventually in line with 2017 representing the biggest portion of our total business, 46.5%, and closing the GAAP accumulated in the 9 months after growing 25% in the fourth quarter at constant exchange rates. The performance of our business in Europe, excluding the production agreement, was negative by 4% in the year, while we recorded a significant improvement in the fourth quarter, up 12% at constant exchange rates.
In the year, European sales were more heavily affected by the high weight of Celine in the base period and by the weak trends recorded by sunglasses in the fashion luxury segment, in particular in the second and third quarter. On the other hand, the region had a very positive broad-based progression in prescription frames, up around plus 11% in the year. Looking at the improvement recorded in the fourth quarter, the period benefited of easy comps but also of healthy underlying trends, in particular in the Iberian markets, Germany, and Central and Eastern European countries. It’s worth mentioning the very good season Polaroid enjoyed in Spain, which is a highly competitive marketplace, where Polaroid has become a business case that we want to leverage and reapply also in other markets. In North America, full year net sales declined by 8.1% at constant exchange rates and by 9.5% in the fourth quarter, with the wholesale business remaining soft, down 6.6% and 6.7% in the respective periods.
Sales at the 80 Solstice stores in the United States declined by 16.5% in the year and by 23.9% in the fourth quarter. A weak performance caused by a combination of declining traffic, for which our comp sales were negative by around 7% in the year and 12% in the fourth quarter, and of course, the closure of 22 stores as part of the restructuring plan. Q4 had a tough base of comparison in terms of the business with chains, as we have lost some listings at the end of 2017, and on this front though, we think that we have done some significant steps forward, for instance, in terms of improving trade terms so that we can regain trust and have soon again new business opportunities with these players.
Moving to our business performance in Asia-Pacific and in the rest of the world. We had a challenging second half of the year in both areas. In the full year, sales in Asia-Pacific closed positive, up 2.1% in constant exchange rates while declining 19.2% at constant exchange rates in the fourth quarter. The full year performance was supported by the positive performance, again, of our prescriptions frames business, one of the challenging comps base, Japan, Australia, and Korea were the weakest spots in the period. At the beginning of November 2018, we appointed a new Commercial Leader for Asia-Pacific in Greater China, Connie Lai, seasoned in our industry and now equipped with the aim of strengthening our business development capabilities in the region, fulfilling an opportunity that we, as a company, still have to catch, which is the diversification of our business portfolio in terms of brands and in terms of geographies.
The year was down 8.6% at constant exchange, and the rest of the world declining by 21.6% in the fourth quarter. As highlighted already in the third quarter, when the decline in the region had somehow exceeded our expectations, the negative performance here was entirely due to the business managed by Middle East and African distributors, which were exiting the second half of 2017 with elevated stock levels compared to consumption and hence, we saw this slump in the order taking this year. On the other hand, we want to highlight the positive performance of India, which represents now 14% of the region and is growing by over 20% in 2018, thanks in particular to the positive development of our proprietary brands and Carrera.
Also in EMEA, we have a new leadership, our latest appointment, Andrea Zaffin, who has become Commercial Leader of EMEA, managing India, Middle East and Africa, has more than 15 years of experience in the industry and the region. And finally in Latin America, which is one of our most promising regions within the emerging markets, we had a decent year, a more moderate decline in the fourth quarter and particularly a good performance in Mexico. And as Angelo was alluding, also here, we have appointed new leadership, David Anabitarte, was appointed beginning of October 2018 as the new Commercial Leader for Latin America. And David has also over 20 years of industry experience and an in-depth understanding and close relationships with the key customers and partners of this region.
Moving now to our economic results and starting as usual with our industrial performance, gross profit in 2018 equaled €481.5 million, down 7.3% compared to the previous year with the gross margin at 50.0% of sales compared to 50.2% last year. At constant exchange rate, the margin was instead up, by plus 20 basis points. In the fourth quarter, gross profit equaled €115 million, which is up 2.7% compared to the same quarter of 2017, while the gross margin improved by 50 basis points from 45.7% to 46.2% of sales.
Key drivers of the stability we reported in the year, at the gross margin level, were first of all, a positive planned performance, which allowed us to increase cost of goods sold, efficiencies and counterbalance negative volume mix effect, resulting from the contraction of our wholesale revenues and also the unfavorable impact from ForEx. Looking at Q4 gross profit, I would point out the 50 points margin improvement was somewhat capped by higher obsolescence cost we incurred at the end of the year, as previously mentioned, also by a greater dilution from the higher production business with Kering in the quarter, which comes at a much lower gross margin, of course.
At the operating level, adjusted EBITDA 2018 was €47.5 million, which is up plus 15.5% compared to 2017. The adjusted EBITDA margin increased to 4.9% of sales from 4%, while at constant exchange rates, the margin improved actually by 130 basis points compared to the year before. In the fourth quarter, the adjusted EBITDA equaled €10.3 million compared to the loss of €2.1 million we incurred in the same quarter of 2017, and the adjusted EBITDA margin moved from 0.8% negative to positive 4.1% this year. 2018 overhead cost savings finally totaled €26 million at the top of the expectations we had for the year. In the last 3 months of the year, as Angelo said before, we paid close attention to all operations driving a sharper investment focus and a very close eye on all the spending.
The final comment I want to make on the Q4 adjusted EBITDA is that its overall improvement, on top of what we have already commented on gross profit, was also capped by the negative retail performance, which was diluting the group operating performance by 70 bps in the quarter. We closed the year with an adjusted group net loss of €26.7 million compared to the loss of €47.1 million we recorded in 2017. Beyond what we have already described, the main additional items to explain our bottom line are on one side higher net financial charges which were €17.3 million compared to €14 million in 2017, which is reflecting an increase in net interest expenses due to the higher utilization of the revolving credit facility during the year.
On the other hand, income taxes declined from €29.4 million to €9.2 million mainly due to the reduced U.S. federal tax rate and lower write downs of deferred tax assets. Now to the free cash flow of the year, this was negative for €25.6 million compared to a negative flow of €70.1 million in 2017. And as you know, 2018 included the third and the last compensation payment of €30 million received in September from Kering. In 2018, cash flow from operating activities equaled a positive generation of €2.7 million compared to an absorption of €31.1 million in 2017. Key drivers of this result were the improvement in EBITDA, and a cash flow from the recovery of tax credits. Networking capital equaled an absorption of €17 million, and this was characterized by lower inventories and the days on hand improving by 4 days in terms of the constant currency, which is a positive driver that was more than counterbalanced by a significant reduction in trade payables.
Net investments in the year equaled €28.3 million, which we dedicated to our product supply and logistics network as well as to the continuation of the rollout of new IP systems. Concluding our full year review with the net debt, as already said, this stood at €32.9 million compared to €131.6 million at the end of December 2017, with the leverage ratio of 0.7x on adjusted EBITDA. The significant decrease in net debt reflected the proceeds from Biedex.com capital increase, which was approved by the extraordinary shareholders meeting on October 29 and successfully concluded on January 2 of this year, when Multibrands subscribed and paid all the ordinary shares which remained unsubscribed at the end of the rights auction for a total consideration of €17.7 million. This last amount, net of the capital increase costs, was therefore not booked at the end of 2018 and we will have it in Q1 of 2019.
Angelo, back to you.
So thanks, Gerd. So 2018 has been quite an intense year for Safilo, but a lot has been done but still a lot to be done looking forward. And this is why, especially with focus on the top line, what we aim for this 2019 is to gradually improve our top-line performance and to finish the year with our wholesale business in growth territories. The key levers to achieve this important target clearly rests on our renewed and skilled group of commercial leaders, as we have already discussed. This is in place, up and running, since a few months and we consider this new team the foundation for the company to really rebuild the needed strong relationship with our main partners.
As discussed in August last year, the work we initiated in North America and Europe, and that we are now continuing in 2019, rests on our ongoing plan to step up service and customer care. Also on the strategic front, customer service, which I remind you, is a core element, especially in the current competitive environment to grant all the opportunity to keep growing the prescription frames business. We appointed a strong and experienced leader and we are now proceeding with the implementation of the needed ICT improvement, which will allow reliable product information in terms of client visibility on the order status and future product availability.
We have also upgraded our aftersales service, enhancing spare parts availability and implementing more extensive new warranty policies. In 2019, we will keep investing in customer service as a core driver to become a much more customer-centric organization. As you may remember, we have a new Chief Commercial Officer leading North America since July last year, Steve Wright, he has been working on building a stronger internal organization and more, and rebuild and reinforce more specific competences, which are needed in a such big market. You may also recall that the focus in this region is also to improve the trust and confidence in the company from a delivering service standpoint, reducing complexity, improving speed to market, and becoming, as said, a much more customer-centric organization.
This is clearly very important in order to strengthen our business and especially our historical strong relationship with the FIOS, the independent opticians. But also reinvent our self and become better equipped to work multichannel with more tailored proposition and tailored credit terms approach to the different customers. In our emerging market, Brazil, China, Japan, EMEA, our recently appointed leaders are working to develop new alliance and partnership in order to drive distribution enlargement and brand portfolio diversification. In some specific cases like in Japan, first important goal we have achieved was to reconquer the shelf space we lost in the previous years in a very important key account. In the course of 2019, we think we can build a better, more sustainable business also in this strategic account.
In China, under the leadership of Connie, we are upgrading and reinforcing our commercial capabilities to partner with customers in a way more relevant for what the Chinese market is asking for. For the year, we expect to confirm positive performance for our Own Core Brands, with Polaroid and Smith possibly as the key drivers as well as for our contemporary and premium portfolio. We expect a better years also for our luxury brands also behind a more stable performance of Dior. As a reminder of this year, the production volume guaranteed by the agreement with Kering half in 2019 compared to last year as the regional contract. With this decline more evident in the second half of the year as order and deliveries of this business are mainly phased in H1.
So bottom line this year, we will continuing our work to rebuild a sustainable economic performance, driven by the building blocks that we have been talking in our business plan. The year should deliver a visible recovery of our gross margin, which is expected to benefit of the cost-saving projects across plans, sourcing and P&L and a positive price mix effect helped also by the expected decline of the production business with Kering. Overhead expenses, mainly at headquarter level are also expected to further decline in 2019. We are without any doubt in the mid of a transforming the company to keep pushing, to keep pursuing our present and future opportunities, as well as to be ready to face and overcome our challenges. As part of these undertaking, we are putting our core business, our core competencies and know-how at the center of our action plan, avoiding any unnecessary complexity and refocusing the available resources on real priority behind brand and country.
So finalizing it, I mean the ’19 is here, we are ready to go for it and we are ready also to answer to your question.
[Operator Instructions] And our first question comes from the line of Nick [indiscernible] from Alisa Invest.
This is Nick [indiscernible] here. I was wondering if you can shed some color on the process surrounding the capital increase, because you announced the H1 results on the 2nd of August and you announced the Biedex.com capital increase at the 26th of September. Why did it take so long? Because I assume discussions on options were already ongoing at the time of the H1 result presentation. Have other options been discussed, for example straight out sale of the company or possible combination with brand vision for example? And in addition to that, how has the subscription price actually been determined? Because it seems Safilo was negotiating with your reference shareholder with your back against the wall. Can you please give me some color on that?
Yes, sure. So basically, we, when we were discussing the business plan and the semester results back in August, we were in the process of determining the right option to refinance the company, considering the context of the market and considering the context of Safilo. Then basically as you said, once we had found the right solution, we announced it to the market. Then of course, the execution of the capital increase requires not only quite the significant work inside the company, it requires also to operate in lockstep with the regulator. And basically, we were able to start the process at the moment that we were able to have the green light from the regulator, which we then eventually did in fall. We determined the strike price or the, let’s say the issue price for the capital increase in line with market practice.
So we look at the Biedex.com price and then we determine a discount to the theoretical ex rights price that is more or less in the range for transactions like this one, and the outcome is basically the strike price that we then decided. I wouldn’t say that we were negotiating with our back to the wall with the reference shareholder. I think we are certainly very fortunate to be able to count on the reference shareholder that has been able to support the capital increase. And I mean as you may have seen from the disclosures, in total the uptake on the capital increase was 81% of the Biedex.com capital, meaning that then the rest was covered by the underwriting agreement of HAL. Other options, I mean there’s nothing I can comment on that would have been on the table. So we decided at the end of the day, that the Biedex.com capital increase was the best way to do it.
Right, sure. Furthermore, can you give some more, call it color on current cost savings and measures that have been taken to improve the top line? Because do you still stand behind the revenue and margin guidance, although it was soft guidance, but you provided some guidance at the time of the business plan presentation? Because basically if I look at the consensus figures and the guidance that you give, there is currently a big discrepancy in the market of 1.5 percentage points compared to the bottom end of the range. So I was just wondering if you can provide some color on the progress of the business plan, your confidence in executing on that?
So what we communicated in terms of targets for the year 2020, we absolutely stand by that. And we reconfirm the targets that we outlined for 2020. As you recall, there were 2 big drivers. One was the delivery of €70 million worth of cost savings between overheads, between cost of goods sold and obsolescence. And here we are making very good progress. In fact in 2018, we delivered €26 million of overhead savings. Clearly, part of that was to complete the previous program that we had launched 3 years ago, but approximately €10 million of that was already going against the new program. So we are moving quite pacey on the overheads reduction. And also on the cost of goods sold improvement, I think we’ve done a lot of work in 2018.
We had very good results on the factories, on the sourcing, so we feel that we have a good starting base and a good carry forward of those activities in 2019. On the top line, of course, we commented on or we set a guidance at the time that would get us to €1 billion or €1.020 billion of net sales in 2020 which translated into a compounded annual growth rate of plus 4% excluding now the supply agreement, which as you know it steps down in half in 2019. This 4% growth on the wholesale is not linear in our view.
So again, we confirm the endpoint of 2020, but clearly in 2019, we have to turn the performance of our wholesale business that we are exiting in 2018 with a decline of 3% in Q4, we need to turn it to growth which aim to gradually do in 2019, so that at the end of ’19, we will still be in growth territory, wholesale business while the supply agreement will go down in half in ’19 and then stay stable. I mean I don’t know, Angelo, if you want to comment on some of the initiatives on the top line growth, but I think it’s mostly what we elaborated before.
Yes, I think that I already comment before, as I said, as I think Gerd was stressing, the endpoint remain what we said. We will get there gradually and in a phased way.
The next question comes from the line of Cedric Rossi from Bryan Garnier.
I’ve got 2 questions. Actually the first one is regarding the outlook in North America. How do you see the trends going on this year in wholesale and also in retail? And in the retail activity, do you think that it’s still going to be dilutive to your profitability in 2019? And the second question is on Levi’s. So I know that it’s only going to be launched in 2020, but do you already know how you are going to position the license? Would it be in the mass cool or in the premium segment? And is it going to be only focused on North America and then be roll out globally?
Okay. So basically in North America, I think we have to, what we have seen in the second half year is not yet a growth performance on the wholesale side of the business, but a gradual, let me say, reduction of the decline. And this is something that within 2019, we will expect to start turning to growth in the year. So what’s working well in North America for us is the sports channel and the business with Smith in particular that is booming. What is working well for us is the business with, in Canada, while the biggest chunk of our business in North America is the independent opticians, the 3 Os, where the performance is gradually improving, but we are not there yet in terms of the turnaround. With regards to retail, let me say, as I said before, we saw a continuation of the decline in the comp store sales. Sorry?
No, sorry. No, no.
So in the case of retail, we saw the comp stores declining by 7%, so we have not been able with the turnaround plan to produce the results that we were hoping for. And so it’s been a really tough year, I think again, on retail.
Then on Levi’s, I’m going to answer. I think that we see the role of Levi’s in what we call the contemporary, the contemporary arena. And I think that is where the positioning as Levi’s is and I think that is where we see our role in our portfolio. But more important, I think that Levi’s should tap into the millennials, on the millennials targets. So we see quite an important role to be played by Levi’s on the millennials. And in terms of geography, the focus will be North America and APAC. And within APAC, I say, I would say by sure China.
The next question comes from the line of Alberto Checchinato from Fidentiis Equities.
Alberto Checchinato from Fidentiis. I have 2 questions please. The first one is about your retail business. Doesn’t seem to have any sign of improvement, so I was wondering whether you’re still considering disposing the business instead of continuing to restructure that? And the second one is about your own brands, can you tell us what is the Biedex.com of revenues you have now from your own brands? And specifically, what kind of growth rates and size Smith and Polaroid have on your total turnover?
Okay, yes, I’ll start with retail. I mean look, I think the situation is that we, as I said before, the turnaround plan, in some ways, we have done the things that we wanted to do, which was linked to the closure of the store. So we closed 22 stores in 2018, which were all loss-making stores and which have been a positive driver to the bottom line of the chain and these were stores that we didn’t see any future in them. On the other side, what we did not succeed was the continuing drop in traffic, and therefore, the continuing erosion in comp sales. So what are we doing at the moment? We obviously continue on the restructuring path of the chain, we continue to be focused on trying to turnaround the comp store performance of the future stores. And we are intensifying also our focus on any potential alternative options. But at this point, there is nothing specific that I can elaborate on, on that one.
With regards to our own brands, so the totality of our own brands is roughly 27% of our net sales. And in particular, the 3 big buckets in there are Smith, Polaroid and Carrera. We don’t give the individual brand numbers, but they are the 3 biggest drivers in there. And here, I mean we had a good performance, as we said, of Carrera, the optical in sunglasses, we had a good growth in Polaroid. And we had last year a sort of flattish year on Smith, but considering the very strong winter the year before, this is a good result. Considering the very good winter that is happening right now in the United States, Smith actually is doing extremely well in the Q. So we are quite happy last year with the performance of the brand.
Yes, if I can add just is that based on what has been the results last year, by sure we will keep pushing on Polaroid. And Polaroid is confirming at the beginning of the year the great results of last year. And that of Smith and Carrera, I think they are both brands are in the maturity level where we can expect, we will expect quite some important growth. So we will be pushing there. At the first sign, all 3 are positive.
If I may, a couple of follow-up questions from the last one. How much the own brands have grown in revenues last year? And is it a fair assumption to say that you would plan to have disproportionate growth of own brands with a positive impact on gross margin in the years of your plan?
Yes, let me start and then maybe Angelo can elaborate a bit what we are doing on the own brands. But last year, we had a low single-digit growth of our Own Core Brands put together. And as I said, we had a positive performance of Polaroid, we had positive performance on Carrera eyewear and we had also positive performance on Safilo. Then going forward, clearly, it is our ambition to step up the growth to the sort of mid-single digit range that we commented on also in the strategic plan. I think on Polaroid, we are there. I think on Smith, we are there.
I think on Carrera, we are getting there. It’s not necessarily an improvement in the gross margin. Because at the gross margin level, most of the brands don’t have a structural advantage or disadvantage, the advantage will then come at the brand contribution level. Because then of course on the own brands, we don’t pay royalties and as we grow the top line, we also gain scale in the marketing and advertising.
Yes, I mean building on what Gerd was saying, we have hired and appointed Antonella Rossi, and she’s just fully dedicated to our own brand. So obviously, answer to your question, yes, strategically, we’re putting the people and we’re putting investment contribution capabilities to grow faster, faster on our brand. That is what we are declaring the plan, that is how we have also organized internally and in the market to catch a faster growth opportunity on all of these 3 brands.
The next question comes from the line of Henry Hillgarth from Quaero Capital.
Just a couple from me really. I think you mentioned this briefly in the presentation, but just to be sure I understand it. From your capital increase, I see that you have a cash inflow of a bit less than €150 million raised. And I was just wondering if the €33 million of net debt that you published, is that essentially missing €20 million that you get in Q1 2019, so actually net debt if we adjusted for that would be only €10 million? And the second question is could you help us understand the size of Dior in terms of sales as it is at the moment?
Sure. So on your first question, you are correct, so basically, what is reflected in the net financial position of €32.9 million is only part of the capital increase to the extent that it was completed in 2018. What is not included is the €17.7 million that we received in January of 2019. So if you would add the €17.7 million to the €32.9 million, you would be roughly at a €15 million net financial position. And with regards to Dior, Dior represents, let me say, just above 10%, 10%, 12% of the group’s turnover.
And just a quick follow-up on that, sorry, on Dior. As far as I remember, you expect the contract, the current arrangement to terminate in 2020 with a potential renewal or not. I’m just trying to understand if there isn’t the renewal, what do you think the impact will be in 2020? I mean is there a growth rate that you can put to that brand, or…
Yes, I think, I mean the current license contract would terminate at the end 2020. We don’t have any confirmation at all of whether it will terminate or won’t terminate. But in our business plan that we have published, we assume it clearly to be there until the end of 2020. We did not assume much growth on it just for reasons of prudence. And then clearly, it will have an impact after 2020 in the case that there would not be a renewal. And then of course, we are talking about the 12%, 13% Biedex.com of the top line that then would be at risk and that would have to be offset with growth of the organic business, the new licenses, Levi’s and Missoni, which are actually kicking in from 2020, and with the interventions on the cost structure.
The next question comes from the line of Cedric Rossi from Bryan Garnier.
I have 2 additional questions. The first one is could you update us on the online channel, what was its growth in 2018? And how do you see this channel to evolve this year? And the second one, so Angelo, you were referring to the new commercial organization. Do you think this one is well structured to offer the best-in-class customer service? Or do you still feel that there are white spots to fill in and that you will still structure this commercial organization this year?
So the dynamic we see on our e-commerce business was very positive in 2018. So we had approximately 7% growth of our e-com sales at constant currencies in the full year. And the e-com business, so putting everything together represents about 3.5% of our total turnover. We grew on the one side because of the business that we do through Internet pure players, which is an important driver of our omni-channel strategies, and we are accelerating partnerships with big marketplace players as well. So on the e-com business, we had a good year.
I answer to your second question on the commercial organization. I think that there are no plans to further adjustment on the commercial organization. I think that we have now, I’m absolutely convinced, the right people in North America, in LATAM, in EMEA, in APAC. And in Europe, clearly, it’s much easier because it’s closer to Padua. So I’m absolutely convinced that the people are the right one, the mood are the right one. We have also reinforced some local responsibility, like in Brazil, like in China, so we have also reinforced, let me say, the level below. So I’m absolutely convinced that the organization is the right one. In terms of customer serve or customer care, we are pushing in North America and in Europe to dramatically step up. It’s really the priority.
We have put more people in U.S., we put more people in Europe, partially in Padua, partially in the country. So I think that the customer service will improve from one side thanks to the country, which they will have more autonomy, more power, more empowerment to really implement the strategy of the country, plus a combination of the work that we are doing in Padua. Obviously, things don’t happen by the magic things. Some of these people like Steve joined the company since summertime, but some, like in EMEA and in APAC, just join us. So we just need to give them a little bit of brief. But I’m sure that we have the right people in place now.
[Operator Instructions] There are no questions. Please continue.
Okay. So just my last comments. I think the next step will be on the 9th of May, right, for the Q1 trading update. Thanks very much for everyone.
Thank you. That does conclude our conference for today. Thank you for participating. You may disconnect.