Samsonite International S.A.

William Yue - Director, Investor Relations Tim Parker - Chairman Ramesh Tainwala - Chief Executive Officer Kyle Gendreau - Chief Financial Officer

Raymond Ching - Credit Suisse Mariana Kou - CLSA Shan Li - JP Morgan

Great, if everyone can take a seat and we shall begin shortly. Excellent.

Thank you very much everyone for coming here to attend our 2016 Final Results Announcement. Today, we have our Chairman, Mr.

Tim Parker; as well as our CEO, Mr. Ramesh Tainwala here in Hong Kong with us.

Our CFO, Mr. Kyle Gendreau unfortunately couldn't beat the snowstorm and he's stuck in Boston.

However, he will - he's also joining by teleconference. So without further a due, I will have Mr.

Tim Parker give a few opening remarks and begin the presentation. Thank you very much.

Okay. Thank you very much indeed William.

And very warm welcome to all this morning. And today, we are reporting another record set of results.

And looking back over the six years since we floated the company, I think this is arguably the very best set of results that we have announced. Our set sales were up 15.5% to a record $2.8 billion, 6% in organic terms ignoring of course the significant contribution of Tumi.

Our gross margin has moved up significantly from 52.6%, up to 54.1%. And of course that is very much the influence of the additional of five months of Tumi which had higher gross margins than Samsonite around 65% and the EBITDA of the company up to a record $486 million.

And when I look back to when I joined the business in 2009 and I think we're on around $50 million. That gives you some idea of the extent of the progress of the company.

And much of that I think is down to the excellent management's abilities of the man on my left here. And we've seen over the last year an increase in constant currency in EBITDA terms of almost 23%.

That is a fantastic achievement by any stretch of the imagination. And of course our adjusted net income pretty much following 18.9% up, 20% up in constant currency terms.

So a very satisfactory set of headline numbers. And we thought it might be useful as I alluded to earlier just to look back over the six years since Samsonite floated in 2011.

And you can see that the company has achieved consistent growth, double digit growth in every single year and CAGR at around 12.4%. So we said, when we floated, we would be a double digit growth company in a strong market.

And we feel that we have been able to come up behind our pledge and our anticipated growth rate of the company. The next slide I think gives you although there is a quite a lot of words on it.

Religious emphasizes the diversified nature of our business and the fact that we are essentially driven by the very high growth, resilient growth market of travel around the world. It wasn't so long ago that Samsonite was really just Samsonite.

In other words about 80% of our sales were around the Samsonite brand. Today, we are fully diversified company, so we draw sales from Tumi of course, Samsonite, American Tourister, Speck, Gregory, Lipault.

So the company actually has a brand at each level of the market and the company now is joined by Tumi which of course is a very strong brand in business products and Samsonite of course has these incredibly strong positions in luggage and general products which are carried around the market. If you look at the top right hand part of this slide, you can see that growth has been achieved throughout all of the Samsonite regions.

And again this is a source of great strength for the company. We don't rely on any single region.

The company is number one in Asia, number one in America, number one in Europe and number one in Latin America. And if you look down to the bottom right hand part of the circle, this just reminds us again that the company is no longer simply a luggage business.

We see ourselves as a bags company that does good luggage. And you can see the enormous growth, thanks to Tumi and business products.

And we are becoming increasing a business which is not dependent on luggage, so that the share of non-luggage in Samsonite sales has moved up from 31% to around 35%. The bottom left part of the circle; we simple describe the manner in which the company has moved in the direction of the direct-to-consumer business.

So excluding Tumi, we've seen a total growth of 11.8% in the direct-to-consumer channel in retail. And e-commerce which is becoming a bigger and bigger part of our business was up 17%.

And we expect in coming years that not only to clip through 10% of our business in e-commerce, but we can see that business easily doubling in the next four to five years. And finally, I think the great strength of our company is that we have invested consistently behind our brands.

So last year, we spent around 5.1% of our sales on advertising and promotion. That was slightly down as a percentage but still up almost 9% on the year before.

And we intend to invest even more behind our brands. I think we'd like to see that figure slightly higher in coming years.

And I do believe that although we have very good products and arguably the best products in the marketplace, what marks the company out is our consistent backing of brands which are recognized throughout the world. So message from me is I think these are excellent set of results.

The company is built on very secure foundations, a diversified business and we look forward I think with increasing confidence to the future. We saw a better second half than first half last year and we look forward to next year I think with some optimism.

And with that I will pass over to our CEO, Ramesh.

Thank you. I am on Slide 7, is basically talking about that our net sales was partly offset by the currency translation.

This is a bridge that we've tried to build it. 2015, our sales were about 2.4 billion from the organic which is around 6% that means existing brand delivered $145 million.

Tumi five month period delivered $274 million. And there was a translation loss of around $42 million.

Now net-net-net the business grew by around 17.3%. And as Tim said before, the growth has come about form all the regions you know U.S, Europe, Latin America and Asia.

The next slide gives you the net income bridge. 2015, our adjusted net income was $217 million.

The organic growth in the net income was 15.74%, we brought $34 million, and Tumi brought in $30 million as adjusted net income which was partly set off by interest expenses on acquisition, net of tax impact which about $23 million. So if you really put both of them together, you can see that the Tumi was already accretive to our business in the five month period of last year.

This brings us to $258 million which is about 20.5% growth versus last year. 2016, we are also since it was partly of Tumi, we're giving you the visibility into the core business.

Excluding Tumi numbers, if we look at it here, the constant currency growth in term of the sales was around 6%. The gross margin improved by 6.5%, marginally higher because of the channel mix.

The advertising came down slightly from 5.4% to 4.9%. As Tim rightly said, it is our long term vision to bring that number up more closer to around 6%.

EBITDA moved up 6.8% which is more or less in line with the revenue growth. And a slight improvement in the EBITDA percentage is mainly on account of slightly lower spent on advertising.

As we said before, there is a strong increase in sales growth and adjusted EBITDA margin from first half to second half. The first half was definitely the business was somewhat challenged.

If you look at the number, the first half, our sales grew by around 4.1%. These are the core business excluding Tumi where the second half, we saw a growth of 7.8%, driven largely by China.

And China first half was 0.4%, it was minus 0.4%, it was almost flat versus last year. But in second half, China rebounded to 10.2% growth.

And similarly we have seen some strong growth in North America. North America first half was 0.5%, whereas second half of 7.3%.

There is also a further acceleration in growth in Latin America where it was 13.6% in first half and in second half it became 21.6%. And we do see a similar momentum in the first quarter of 2017.

This is the Tumi results for five month period. The net sales grew by 9.7% from $251 million to $276 million.

Gross margin also improved from 52.7% to 64.7%, part of it is because they start to get some benefit of sourcing from Samsonite team. But I would say this is just the beginning of a long term objective is to see to gross margin being more closer to around 70%.

We believe by 2018, we should get there. We also see that we dialed up the A&P spend behind the brand Tumi from 2.8% to 6.7%.

The result of that was that there is a small marginally drop in EBITDA. But if you really adjust the additional spend on A&P then EBITDA margin moved up from 26.7% to 26.9% for the five month period.

Tumi acquisition integration update, integration is going largely as planned. Management structure is in place.

Rob Cooper is general manger for our North America business. Asia and Europe has been integrated with our regional teams.

SAP conversion is on track for May 2017, which will allows us then to get the balance cost synergies which we had planned. Buy back of distributors progressing ahead of plan.

South Korea is already completed with effective from 1st January 2017. It's directly operated market.

That is also making very good progress in some other key markets namely China and Hong Kong. So before end of this year, all major markets will be directly operated markets.

Sourcing initiatives is also going very well. Additional gross margin improvements are anticipated in 2017 and beyond as I said by end of 2018, we expect that the gross margin improvement for Tumi's core business would be closer to around 1,000 basis points.

Part of that we will invest back behind a brand. Our intension is of that 1,000 basis points probably 700 basis points will be invested back behind the brand because brand investment is low today.

And other part of it will dropdown to improve the profitability. The timing of certain cost synergies intentionally has been delayed to be careful not to disrupt the business.

Estimated synergy savings for to date is $3.7 million, which is approximately a run rate of $9 million annual saving. We believe that the balance by end of 2018 the synergies would be running at a rate of around $25 million per year.

The big part of - big chunk of the next level of synergies will be brought back home once we implement SAP, which is on track to be completed by May, 2017. This gives you a little bit of a brief as how the numbers look like by region, so if you look at 2016 there is a growth of around 24.2% part of it is also because of the consolidation of Samsonite Japan to peel that number away then it's about 2.9% growth, North America grew by 6.6%, Europe by 3.9% and cooperate is some of the deals which is 37%, overall growth has been around 9.7%.

The EBITDA margin has come down little bit, but if you peel away the additional $10 million that we have spent on advertising then EBITDA actually increased by 14.8% during the same period. Overall EBITDA margin has down from 26.7% to 23.3% once again this is mainly on account of additional A&P spent otherwise it would have been 26.9%.

Going by region now. Asia, strong net sales and profit growth aided by additional Tumi of course and supported by moderate growth in the organic business.

The organic business grew by around 9.9%, excluding Tumi the growth has been around 4%. The EBITDA grew by around $5 million and as a percentage of sales is more or less in line with last year excluding Tumi.

And we look at different countries, I think in the first half three of our large markets where challenged. Korea, India and China what we have seen in the second half is that China has recovered very strongly; it has delivered more than 10% growth in the second half.

India started very well in quarter three, but by the time it came in to quarter four because of certain governmental policies of demonetization the growth got moderate. Korea is still continues to feel pressures of political uncertainty and some other pressures that it has because of differences that it has with the Chinese government.

So when we look at our outlook in quarter one, we see India coming back very strongly and in line with our Chinese growth. So both these markets are now delivering double digit growth, whereas Korea still continues to be range bound all other markets are more or less the same.

Our North American business grew by 26.8%, excluding Tumi it grew by 3.9%, but here again when you look at it our first half to the second half, when we look at our first half of our growth was moderated, but we see strong rebound in the second half. Even our comp ratios in North America, the first half we had negative comp 4.4%, in second half it was positive 5.2%.

So that itself reflects that there has been rebound in our business in North America in the second half and we see similar momentum continuing in 2017 and within North America practically all our brands delivered strong growth. Europe, we had a very strong growth excluding Tumi, the constant currency growth was 10.3% including Tumi it was 16.1% that EBITDA also marginally moved up from a 17% or 17.9%, which is about 100 basis point improvement over last year, part of it is also due to slightly lower advertising spend in 2016.

But there were most of the markets, most of the countries in Europe delivered very strong numbers. UK 21.3%, Germany 15.7%, 11.3% and Russia 23.3%.

It was a very strong growth in direct-to-consumer channels, retail grew by 14.6% driven by 7.6% same store growth and six additional stores. The direct-to-consumer e-commerce also grew very nicely by 31.3%, wholesale which is continues to be an important channel for our European business grew by 7.6%.

And we see similarly very strong growth across brands Samsonite grew by 7.8%, American Tourister by 21.9%, Lipault by 27%, Gregory by 31% and we see similar all rounded growth in different categories. Travel grew by 7.2%; Business by 17.6% and Casual category grew by 37.2%.

So I would say that Europe was a very, very satisfying performance in 2016, and we see similar very strong momentum continuing in 2017 especially in the first quarter. Latin America, which continues to be our region where we continue to make investment, investment in retail investment, investment in theme and investment in infrastructure.

It also delivered very strong growth 17.4% driven by a very strong growth in Mexico of 30%, Chile 6.8%, Chile is a more matured market for us in Latin America, Brazil by 25.5%, it largely came of retail channel, which is 37.8% growth and the same store comp also were very nice 9.4%. Wholesale channel, which is important in Mexico grew by 17.6% and this growth is also coming as a result of growth of all of our brands.

Samsonite grew by 18.9%, American Tourister almost doubled to 98.5%. American Tourister now makes up around 40% of the revenue of the region and continues to grow.

Xtrem which is our backpack brand also grew by 9.4%, Secret which is our handbag brand there grew by 17.1%, Saxoline is a low end luggage brand, which also grew by 5.5%. Similarly category wise Travel grew by 22.6%, Business by 25.7%, Casual and Accessories by 9.5% and 6.9%.

I think there was an all-round strong growth in the numbers profitability was a little bit down by 400 basis point, which was by design because we were investing to reinforce our infrastructure there in terms of new retail expansion, we have moved to new warehouse, we are now migrating all the countries and implementing SAP there, so these are one off cost and we believe over the period of time Latin America should be able to deliver similar profitability as our other regions. Constant currency net sales growth in most key markets, look at the U.S.

overall grew by 3.8%, but as a first half the growth was only 0.7%, so there was an acceleration from first half to second half in the U.S. China, which I said before, China grew by minus 0.4% in first half, which had a strong rebound with 10.2% finishing the year with 5.3%.

Korea is still is minus 1% when the first was like that, Korea does continue to suffer because of political and uncertainty and lack of Chinese tourists going there. But probably those same Chinese tourists we are now finding them in other countries more particularly in Europe that is why when you look at our European numbers they had a very strong growth; Japan 12.2%, Germany 15.7%, Italy 11.1%, Australia 21%, UK 21% and likewise.

India we see here had a flat year, it did started quarter three was a strong year, first half was a tough period for us, but quarter four again because of the demonization it lost momentum, but we find that in quarter one of this year the momentum is coming back and it is back to delivering double digit sales growth. Some of the other emerging countries also had some very good numbers, Mexico 30%, Russia 21%, and likewise.

Direct-to-consumer channel sales accelerated with acquisition of Tumi. So when you look at last year numbers, Samsonite's non-travels, I mean the retailer direct-to-consumer which includes for us e-commerce as well as bricks-and-mortar contribution was 23% and wholesale was 77%, Tumi is other way around where they have more direct-to-consumer is about 60% of the business combined together, today our direct-to-consumer business is about 30% and 70% is wholesale and this is taking into account five month period of Tumi.

But if you really combine the full year number of Tumi as Tim rightly said the non-travel contribution has already not known Travel. The direct-to-consumer contribution has already moved to around 35%.

To give you a little bit of perspective before, Tim came on board, this number for Samsonite was less than 10%, it was single-digit, low single-digit. So we were largely a single brand and largely a luggage company from there we have reinvented ourselves where the non-luggage is now contributing to around 35% of the sales and we had expressed our desire during IPO days that what a period of time we would like to see our non-travel component of our business to become 50% and we are making very good progress every year that makes the business far more resilient, because the buying cycle for non-travel is shorter, and the non-travel product also are more resilient to any kind of shocks [ph].

And within this direct-to-consumer e-commerce is growing very, very rapidly. So if you look at our e-commerce growth in 2016 has been 17.2% and e-commerce contribution to the entire sales is now up to 9.5% as compared to 8.5% last year, I have no hesitation to believe that number will keep growing it and it could be more like 15%, 20% in next handful of years.

Diversified a five brand portfolio, Tim spoke about it, we were largely Samsonite was our brand which contributed to more than 90% of the sales, as we look at it on a full year basis, if I combined the 12 month number of Tumi, the other brands and Samsonite is fifty-fifty, so the contribution of non-Samsonite brands of portfolio and if I take 12 months number of Tumi is already reaching that 50% kind of the mark. I think this also has been a great achievement, which had been made under the leadership of Tim.

If you see that all our brands have shown very strong growth, Samsonite growing by 5.9%, American Tourister I'll cover it separately, which had a little bit lower growth, Speck 15.9%, High Sierra had also a smaller growth, Gregory, Lipault, Hartmann all of them had strong growth. Asia when you look at it, because three big markets in Asia, as I spelled before in the first half more particularly these markets where challenge, which was Korea, India and China and because of that we have seen a negative growth in Asia with American Tourister of 7.3%, high visibility into the quarter one number, quarter one number American Tourister in Asia has rebound to deliver high single-digit growth.

In spite of Korea still remaining somewhat challenge, primarily riding on good momentum of this brand now back in China, and in India. North America in any way grew by 3.1% and Europe grew by 21.9% and Latin America by 98.5%, so I've no hesitation to say that American Tourister would be back to high single-digit growth in 2017.

Speck has been - not Speck, High Sierra also have seen a small de-growth which is mainly on account of some of the businesses that we had last year did not get repeated in 2016, I think by 2017 we would be fine, and we also decided to exit Speck - High Sierra from few of the market, because we wanted to productize few other brands, which had been recently acquired by the company, so because of that also you see a small de-growth in High Sierra. So High Sierra going forward in 2017 would be focused and we would put all our resource behind High Sierra to grow it in few markets.

North America is already doing very well. Australia continues to do extremely well.

In Asia, we will focus our efforts of High Sierra only in Korea and Philippines and similarly we will drop out of High Sierra in Europe for the time being, that does not mean that this is a permanent decision, we want allocate our resource and do justice in this markets and then in coming years we would once again launch High Sierra in other markets as well. Kamiliant, which is a new entry price point brand, which has been just recently introduced in quarter four in Asia, more particularly in India, Middle East, Korea and China, is off to a good start.

I think that could become one of our major brands in next handful of years, especially in emerging markets. The next few slides are giving you a flavor of different products that we have under our different brands.

All key categories contributed to net sales growth. Travel, the constant currency growth was around 11.4% and without Tumi it was 4.5%.

Business grew by 38.2% without Tumi 3.8%. Casual 16.4%, Accessories 47.3%, and others it's negative because there were some third party brand which we were selling in our rolling luggage chain of stores, we have been cutting down some of those third party brand that's why it's see a small de-growth there.

8.9% increase in global advertising as a percentage it came down a little bit. It was partly to also allow us to navigate the tough times, but it is definitely our intention to creep up the A&P spend from 5.1% last year to more like 6%, 6.5% over next handful of years.

Yes, now we will have Kyle go through the financial highlights. Kyle?

Yes, good morning everyone. William, can you hear me okay?

Good morning everyone. William can you hear me okay?

Yes, Page 28 now.

Okay great. Look on Page 28 financial highlights, there's a lot on the page, let's talk about financial highlights.

As Tim started with sales growth of reported sales of $2.8 billion, growth of 6% or around $145 million of growth in the organic business that's $276 million of Tumi for the five months. Adjusted net income up 18.9% despite the year-on-year increase in interest expense of $40.5 million, so including the interest expense for the Tumi deal, we had adjusted net income of 18.9%.

Very strong operating cash flow $260 million, up slightly from last year, despite the increases and cash interest and $37 million of acquisition related costs. So underlying cash generation the business very, very strong.

From our net debt position is $1.57 million and $368 million of cash and cash equivalents with debt of $1.9 billion. As we know that was to finance the Tumi acquisition, we have a revolver, revolving facility of $500 million of which we as year-end we had $13 million drawn, so plenty of capacity on our revolving facility.

We're in compliance with all of our debt covenants. At the end of the year, our pro forma net leverage is at 2.84%, slightly ahead of what we probably guided in our own anticipated level.

So we thought, we will be around three times levered at the end of the year, so running a bit better than that. We were able to reprice our debt in February of 2017, which has the effect of lowering our cash interest expense by around $16 million in the first full year.

From an interest rate perspective what that means is on our term loan A, we've reduced from LIBOR plus 275 to LIBOR plus 200 and our term loan being reduced from LIBOR 325 to LIBOR 225. So we're quite happy to catch the market in this repricing and that will go a long way in helping us deliver accretion with Tumi in its first full year in 2017.

Networking capital continues to run very strong even including Tumi, we're running below our target, so we're running at12.6%, and our targets has been around 14%. So we're quite happy with that and we'll see that improve as we fully integrate Tumi particularly on the back of the SAP implementation.

CapEx spent for 2016 was just under $70 million widely focused on continue to growth retail and store modification and also some investment for making in some of our production facilities particularly in Hungary. In connection with the liquidation of our pension plan, this regards a project we've been working on for several years.

We're able to finally annuitize our U.S. pension plan.

On the back of the accounting for that, we had a large differed tax liability that was reversed in our numbers. So we end up with a $56 million-$57 million differed tax liability removed which is a benefit to our tax expense for this year.

We also have small gain in exiting the pension plan of around $6 million. Excluding the tax benefit for this plan liquidation and also there is a slight rate reduction Luxembourg and we're able to do that lot of the acquisition cost for Tumi.

Our effective tax rate for the year on a reported basis is actually benefits. If I adjust for these items, our effective tax rate is running around 27%-28% for 2016 compared to 25.4% to 2015.

And I'll show you a table so you can understand our tax rate. And that's roughly where we'll be on a go forward basis around 27% to 28%.

On Board Meeting yesterday, we approved the cast distribution to shareholders of $97 million and that's up 4.3% from what we did last year. That's a slight increase to our payout ratio.

So if you adjust for the pension liquidation tax benefit, which is really a non-cash item, that payout ratio is around 48.8%, up from roughly 47% last year. And our payout yield is up slightly year-over-year as well.

If I go to Slide 29, what I've done here is try to breakdown what we view is underlying net income growth for the business and then some of what I would label specific to 2016 and more particularly the onetime items that we have in 2016. So if you look at the left of this chart, you can see our underlying business delivered $32 million of growth.

If you look at 2 million in three buckets and we group them together, that will take Tumi's breakeven for 2016 for the five month period including the interest cost from the amortization with $30 million of net income added for Tumi for those five months. So the right side of the page are the one-offs which is that we benefit from the pension liquidation $57 million.

The tax effected acquisition cost in complete the deal which pull to our P&L that's $26 million. And there were some small things associated with getting the Tumi deal brand before we close the deal in August.

And so that respect, it's a helpful slide hopefully for you to really understand underlying growth which is we're very positive, we have a net benefit from onetime items in underlying growth. But I took it very important that you adjust those somehow you looking at underlying growth for the business.

On Slide 30, probably more numbers in wide sheet but this is a great done of our tax rate. And I just draw you to a couple of points.

In the middle of the page, our effective tax rate on a combined basis including Tumi, excluding what I would label as onetime items, our tax rate is around 27.8%. We had three onetime items, the impact of Tumi acquisition part which gave us a 4.5% benefits for tax rate.

Luxembourg had a great decrease and when we apply that decrease to the differed tax liability to carrying that had around $9 million benefit to our taxes in year 3.3%. And then as we said the pension plan liquidation had a very meaningful impact for our tax rate to end up with effectively tax benefit in 2016.

For guidance for next year, I think our tax rate will be very similar to our effective tax rate on the combined group. Around 28%, we're putting a range of 27% to 30%, I think we'll be right in the middle of that range from an effective tax rate on the go forward basis, which is in line maybe slightly better than what we anticipated when we're evaluating the Tumi transaction on a combined basis.

If I go to Slide 31, really just a snapshot of our balance sheet, I covered most of this. We had cash last year of $180 million.

We had $316 million of cash at the end of 2016. Tumi come in with a $145 million of cash that we do for the step up.

But we generated $260 million of cash and last year we spent around $70 on CapEx and $93 million on distribution to shareholders. So we're in a solid cash position.

And from a debt perspective, we said our leverage ratio is running around 2.84 and we have around $490 million of that build in our revolver. So from a debt perspective, we are running slightly been around expectations for the end of the year.

And then as I said continuing strong working capital efficiency of 12.6%, which is on Page 32. You can see on this page that our working capital last year, efficiency was 11.8, that's up to 12.6 largely with Tumi coming in for the five month period.

And we annualize Tumi for purpose of calculating these numbers. And so if you look down the page, our inventory days 111 actually 109, if I fill Tumi, we've actually gone to 102 for our core Samsonite business.

Tumi has a slightly slower inventory front of which we will be able to tweak as we manage this inventory in their planning. And so I anticipate their inventory days go roughly105 days for the full year 2017 which is where we've historically been.

Trade payable and trade receivable slightly down really off of the back of the mix of the Tumi business, more retail which will bring down your receivable days. And days payable slightly down 109 to 100 days.

As we bring Tumi on to our payment terms, we will see that the payable days will set back up. So we're quite happy with the working capital level with 12.6 and you should expect to see some improvement from that for the full year 2017 once we fully integrate Tumi with an access.

And then from a CapEx perspective, I covered this. When we look at where we close this, it's largely retail expansion $34 million this year.

And investments in product development R&D is by largely - so it is around $24 million. And Tumi has a CapEx spent of around $30 million to $40 million and we've guided in our annual results that our next year CapEx spent will be around $115 million really reflecting the full year Tumi such our core business.

And with that I'll turn it back to your Ramesh.

Thank you, Kyle. Outlook and strategies for 2017, we believe that increase in disposable income and living standards in developing countries growing popularity of outdoor and adventures sports and growth of tourist now are all expected to drive growth of global luggage market at a CAGR of 6.1% through 2021.

That should allow to growth our business at pace slightly faster than that. Continue to develop companies well diversified multi-brand, multi-category, multi-channel luggage and bag and accessories business that we spoke about it.

As I told you that as of now, non-travel component of our business is around 40%. Combined together with Tumi and we see no reason over next handful of years, it will not hit 50% mark which was our original strategy as spelled out by Tim during our IPO days.

Leverage the company's regional management structure sourcing and distributing expertise and marking engine to extend Tumi's strong brand into new market and penetrate deeper into existing channels. And as we all know Tumi is a great brand but it is - has a very strong distribution in North America.

But by same definition there is lot of opportunity to growth this brand into less represented markets of Asia and Europe and that would continue to be our focus in 2017 and beyond. We'll also thoughtfully deploy our multi-brand to operate wider price point and broader consumer demographics in each market.

As we spell that we have launched this brand Kamiliant in India, Middle East and some of the Southeast Asia countries to operate price segment which is sitting below American Tourister . So it's a part of our spelled out strategy to cover all different price segments of the market reach out to different consumer demographics in each of the categories of luggage, bags and accessories.

Increase the portion of Group's direct-to-consumer channel by growing direct-to-consumer e-commerce and through targeted expansion of brick and mortar retail presenting. As we spelled out before, this component is right now around 35% of our sales.

Out of that 35% around 6.5% is e-commerce. We believe that this 35% can also growth to around 50%, within that e-commerce from currently around 5%-5.5% to grow to around 15%.

So overall put together could be around 50% of our business. We will continue to invest in Group's core brand with sustained R&D spending to produce lighter, stronger new material, new processes and exciting innovating new products.

We also intend to continue to invest in marketing in 2017 and support the global expansion of Tumi as well as drive the core brands of Samsonite American Tourister, Lipault, and few others. As I said before, from 5.1% or next handful of years, we do intend to more up our A&P spend to get closer to more like 6.5%.

Execute on market opportunity to recently acquired brands for further diversify group's product offering into non-travel category.

Thank you, Tim, Ramesh and Kyle, we now open the floor to questions.

Hi. Raymond Ching from Credit Suisse.

Thank you, William, and thank you management. First of all congratulation on the very strong results.

I have three questions. Number one is Ramesh you just mentioned that in 1Q 2017 you are seeing a similar momentum in terms of organic sales growth versus second half.

So is it like on per regional basis, it is like the case or on a group basis, this is like the case, can you elaborate a little bit and what's your - any guidance for maybe first half of this year in terms of the organic sales growth? And my second question is on the Tumi.

We know that Tumi, the A&P expenses will further increase in terms of ratio and absolute amount, but you also mentioned about there will be an additional 9 million cost saving for the full year annualize. So if net-net, do we expect Tumi's EBITDA margin to chop this year after spending the advertisements?

And then it's on the debt level, I remember that like we do have mentioned previously we probably that we might use the internal cash flow too gradually we pay the debt. So is that any like period has lock up that we cannot repay or when is the schedule that we plan to gradually pay down the debt for financing Tumi?

Yeah, thank you.

The first one you know the Q1 momentum as I said, we see similar momentum continuing from second half of last year into Q1. There could be country-to-country variances.

But when you really look at everything put together, in the second half of last year, our core business grew by around mid-single digit and that's a same kind of a number we are looking at it in the quarter one and probably same thing continuing in rest of the year. There could be some small moment between one country to another country.

As I said we do a continual softness in Korea but we see a strong growth in European markets. So it could be movement from country-to-country, region-to-region, but overall these are numbers we're looking at it.

Now Tumi's A&P, we believe brand like Tumi, the sustainable level of A&P send should be more like 600-650 basis points, which is more or less in line with what we would like to otherwise spend on our other brand. Historically, it has been very underinvested brand, they've been investing about let's say 100-150 basis point of the sales in the past, which we want to keep it up.

We believe that there is beyond cost synergies. There are also opportunities to move the gross margin up.

What you would find will be that in whatever cost benefits that we can get out of synergies or through improvement on the sourcing side, all of it in the first year will go in funding the A&P of Tumi. When you get into 2018 that means that the profitability of Tumi will remain similar level as it is now, okay.

But when you get into 2018, where we will be able to secure our pocket, most of the cost savings and margin improvement, at that time you will see that the profitability of Tumi is starting to creep up. On the debt level, is Kyle there?

Yes, Kyle, would you like to take a question on the debt?

Yes. Yeah, can you hear me?

Yes.

Okay. So we started actually repaying some of the debts and we have small amortization at the end of 2016.

We have an amortization scheduled at bills overtime, so we'll be paying required that payments at the end - over the period of 2017. And then the way our debts works is that excess cash flow of the portion of that, that will go into repaying debt.

So it's not a perfect number, but we'll probably end up paying somewhere between $50 million to $100 million gets the debt for 2017, which will be a small portion of required amortization and then excess cash flow that will get applied to the debt. And you'll see over the next couple of year, our leverage ratio come down.

I think we had guided in kind of in the two to three year period. Our full year is in closing, we'll probably get close to two time leverage.

In our view is that that it will still be achievable with those that repayment and growth in EBITDA. We have a little extra cash at the end of the year.

If you look at our cash some of that cash coming in but the other pieces we knew we are going to be buying back some of these distributors that Ramesh talked about as far as integrating the Tumi business. And so right out of the gate in January, we sent some for Korea.

We are working on some of these other distributors and so some of that cash will go towards distributors. These are low checked items, they are not repurchases but they are piece of the puzzle then why we are carrying a little bit extra cash at the end of the year.

Thank you, Kyle. Yes, in the back first.

Thank you. This is Mariana Kou from CLSA.

Thank you management for taking my questions and again congratulations on very strong set of results. I have three questions.

My first one is on the sourcing side, could you actually help us kind bisect on or think about any possible impact form the USA in terms of policy and how you might actually change your strategy on your sourcing side? Number two is just on, if you could give us a bit more background on tax benefit, liquidation situation of the retirement plan and if there could be any impact on the operating expenses going forward i.e.

the EBITDA margin for North America? And number three just a small question on Tumi IP, I think previously we talked about potentially moving the IP to Tumi and there could some tax impact, if you could help us get an update on that will be great?

Thank you.

Okay, on the sourcing, I know that it has been covered bit much in the press. We have been - it's not recent thing, we have revaluating our sourcing strategy for the company as a whole for last couple of years.

And result of that was that already couple of years back, we made investment in manufacturing plant in Hungary with two objectives. At that time our objective was there.

We wanted to bring manufacturing closer to the market, so that we can follow the ups and downs in the market much more closely. When you source the market in the orient, you have six month of pipeline.

So if you have a collection coming in and the collection doesn't well, even if you close the tap still six month of the shit will still be flowing in and we have to figure it out what we're going to do with that. Where there's been you are doing manufacturing closer home where they are close to the market, you can probably correct the inventory planning month to month of even week to week.

So that was advantage, but when the plant has got compulsion in Hungry, we were also presently surprised to see that the cost of goods in Hungary is not necessarily higher than China, because technologies have changed, you know lot more automation can be done. And the result of that is we are now starting to evaluate should we not look at a similar opportunity in our North American market, which is our largest business market.

At this stage this was another project which is getting influenced by a presidential policy, which may change from one president to another president. We are talking about cost of goods versus cost of goods.

We are talking about how can we better serve the market and follow that friends in the market much more closely. At this stage we have just done some preliminary work in terms of the studies there and it does this an internal study and the conclusion of the internal study is there, it does make economic sense for us, and this is not based upon supposedly increased import duty or reduced import duty just this is purely based upon status cope.

But this is just an internal study. We are now going to start a more objectively external study, based on that whatever will come out of it, we will take an appropriate decision.

I must tell you manufacturing is not about taking a decision linked with one political leadership, because when you decision for manufacturing it is for next couple of decades, and where many different political parties will come and go, so we will take a more informed decision, but I must admit it that we are extremely satisfied with the performance of or our decision which was taken under Tim Parker's leadership of expanding our manufacturing in Europe. The last one was the tax benefits.

Yeah the next question is about the tax benefits or perhaps Kyle can jump in on that?

Yeah, so we few questions entering, so if you remember on the U.S. pension plan we have for this plan several years back and we're just navigating towards new advertising and removing it.

So the annual cost to our U.S. business is pretty low, it's probably a shade under $2 million.

So you're not going to see a P&L impact without liquidity in this. What it does, we will take the risk of kind of variability in the pension liability growing over time.

So but from a P&L perspective a slight benefit nothing you will notice in margins for the U.S. business.

As far as it will be in the Tumi in the final stages of that, I think we had guided there will be some tax impact so that I think it probably will be guided we're probably looking at a cash tax cost of around $15 million to $20 million and that's being finalized to here over the next probably the next two months.

Great. Next question please.

Ana please go ahead.

Hello I'm Ana [ph] from Deutsche Bank. Management team, I like to check with you regarding Ramesh just mentioned that for the first half, we're looking for core business excluding Tumi something the run rate of mid-to-single digits given for the second half we have a higher base in last year, so what is our realistic like target for the full year, so that's my first question.

And also now that we have U.S. having around 35% or higher in terms of market share, in terms of the total sales, a strong U.S.

dollar how would it impact in terms of our net course impact on the GP side and also like how soon can we like increase our price at a retail end, so we'll let to check with that question. And then thirdly regarding Tumi, for Tumi, we mentioned I think like we have been talking about getting more of the whole business that to direct-to-consumers, so we have Korea already, and so what about like you know you mentioned about by the end of this year we'll have most of the key markets that will be done.

So what are these market you're referring to, what about the updates in Hong Kong, China and apart from that right now is the other markets that you - next in the pipeline? Thank you.

The momentum and the trading updates that we have as of now, barring unforeseen circumstances, I see no reason why we should not going to deliver mid-single digit for the entire year as well. I'm talking about the core business.

Coming back to the strong dollar, as you know that strong dollar does not affect only us, but it affects everybody else. Definitely, as we have done in the past, we do try to navigate our pricing in a manner that be protect our margins.

So there would be cases where we will take selective price increases, but at the same time there would be also cases where we will go for value engineering of our products, but overall it will be our endeavor to maintain the margins of our brand in similar range as it is now. Except for Tumi, where we still are working to improve the margins in Tumi, but our other brands core business the margin has to be looked at it remaining same as last year.

Coming to - let's say Tumi distribution in other markets. As I said before, Korea is already back home, Japan is already a direct market.

These are two big markets. There are other smaller markets like London, like UK, it also back home there was a small distributor in Spain that's also bad, but they were rather small in nature.

There are few - like in Indonesia, Thailand, they all will be with us in quarter two, which includes China, which includes Hong Kong. So you can take it that for quarter two, for the second half of next year probably all the markets where we intend to operate directly would be directly operated.

There could be few smaller markets, which may still continue to be operated through distributors you know they're very small ones. But all large markets by quarter two would be directly operated.

[Technical Difficulty]

This is moving around, so we do see that there is a little bit of softness in the gateway cities again in U.S. there's less touristic arrival, then what was seen in the I would say in the quarter three, quarter four of last year, so there is a little bit of moderation now in U.S., but we had the same time see a very strong growth in Europe.

So I think by now working in this industry I tend to believe that people never cancel their holiday plans, they just choose the holiday more judiciously, so maybe the Chinese will not go to Korea, because the government wants to discourage them, but they will show up somewhere else. We see very, very strong numbers in Austria, in Germany and again in Greece, they are small market, in Russia the business is booming it's like plus 40%, I'm sure they're not that many new Russians were buying it, it is just that Chinese also discover rational.

So I think as long as they don't change their habit, they choose one country to another country we would be fine.

Great. Jeffrey can you - let me know whether if there is any - oh no questions from online, excellent.

So, Shan in front.

Hi guys, good morning. Shan Li, JP Morgan, couple of questions.

Just firstly Tumi, it's predominant, well it's right of share of the business is direct to store, directly operated retail. I just wondering can you give us a sense of what the operating leverage of that business is, so in the context of 2017 you mentioned that you don't expect any operating margin expansion in what type of sales growth could you get, where you would get operating margin expression spot through operating leverage.

And secondly, could you give us some guidance around depreciation, just seems a little bit high this year, just only some guidance going forward.

Tumi's core business, and when use the word core, I mean is there that not the way we would look at it, you can looking for Tumi delivering double digit growth in 2017, on account of the additional investment that we're making to push the brand out, also on account of going direct in many of the markets. So when you combine both of them together, I think we can very well look for Tumi to deliver like mid-teens kind of a growth in 2017.

As I said it's a combination of both we're going direct as well as additional A&P spend that we are committing behind this brand. In terms of the margin expansion, there is not much operating leverage, as I spelled out before, we're looking at two things, number one there are cost synergies at the back end of the business part of it is already been pocketed, big chunk of it really come about then we will be - when we will implement as SAP, they will be working on the same platform as us, which is today targeted May 2017, so a second part of the cost synergies will start coming in at that point of time, I think it's in 2018 that entire synergies - cost synergies that we had estimated in our plan, which is about $25 million yearly will be seen in our business, which will then in turn create some operating leverage.

In the big story for Tumi is, we believe that Tumi is a strong enough brand combining it together with the sourcing skills of Samsonite, we should be able to move the gross margin by about 1000 basis point. Now part of that 1000 basis point improvement will go to fund an increase of 600 basis point on A&P, to the first savings that we get it all of it will go in funding the additional A&P as a result we are guiding 2017 also you may look at it their margin to remain same as last year.

From 2018 when we will get additional cost synergies coming in and also the balance 400 basis point improvement in the gross margin picking in, you will see some margin improvements in Tumi in 2018.

Great. Other question is in the back.

Hi, I'm looking at Page 34, you mentioned that the industry will grow by 6.1% CAGR through 2021, what is your current market share and what is your targeted market share by then. The second question is regarding the statement here growing popularity of outdoor and adventure sports, so the besides to two brands so you have already Gregory and High Sierra, are you looking for other acquisitions in this space?

Thanks.

Say, the industry is expected to grow around 6%, and we see no reason why with our portfolio brand or our strength of our machine that we have which are operating in 100 odd countries worldwide, our ability to commit more advertising dollars behind our brand that we should not be able to grow faster than the market, so is more like high-single digit kind of a growth creeping up to double digit growth, combining together with Tumi numbers is what you should be looking at it, and what as Tim said, if you look at last year five years of CAGR also we have delivered around 12% plus growth. The similar things should be expected out of us for next five years as well.

Now coming to the outdoor business, we are currently operating three brands in outdoor segment, one is High Sierra, which is largely an American brand, then we have a homegrown brand, which we created our own call Xtrem, which is mainly to day deployed in Latin America. And then the third brand that we have is Gregory, which is largely today a Japanese and American brand.

I think outdoor we are aware is one of the strongest growing category. But I must also say that this is one category where the distribution of this category is way different than the normal channels of distribution where our strength lies, so we are also navigating and learning the distribution channel step by step.

The growth of Xtrem, the growth of Gregory both has been very, very satisfactory for us in 2016. High Sierra was a little bit disappointing, we expanded everywhere, so the message we learned was that we need to operate this market step by step, because when you really get into a market it's not only about the product.

As I said to you before the distribution is more different than the traditional distribution of luggage and business bags. Secondly we also need to commit advertising dollar behind it, so our idea now is that we will expand Gregory in few other markets in Asia, more particularly in markets like Korea, Taiwan beyond Japan, we will also expand High Sierra now beyond Australia, U.S.

and more seriously in Middle East and Korea. And Xtrem, as I mentioned before it has already been launched in the - Xtrem was previously until 2015 was a brand which was limited only to one market Chile, but we launched that brand in other Latin American countries mainly Mexico, Colombia, Peru and Panama and some of the other countries with really huge success.

I would say we're just starting in the segment, it is a big segment, but we want to learn as we walk. At this stage there is no - let's say there is no concrete proposal with us to acquire another brand in outdoor space.

But I wouldn't say that we will keep our eyes closed, if something credibly presents itself, we would not hesitate to have a look at it.

Okay, in the back.

Thank you, and this is Angeline from Petro Capital. I want to ask about your distribution channels, and whether there is any synergy or a consolidation of distribution with Tumi, and if there's any synergy involved and also about your retail channels what's the percentage of leased versus owned properties and how the strategy for the retail implementation?

Thank you.

Yeah. There's no obvious distribution synergies between Tumi and Samsonite.

We have no intention to sell Tumi in Samsonite doors or vice versa. But at the same time Tumi has I must admit that Tumi has a much better and deeper understanding about retailing much better than we at Samsonite in the past have no.

So we definitely intend to leverage their knowledge of retail to the benefit of our other brands. But in terms of combining the two brands it would generally not happen that does not mean that there are we had acquired a retail chain in UK largely, UK and Australia, and now we will start to expand its footprint to other parts of the world called rolling luggage, which is a multi-brand, multi category luggage retail outlet, which was traditionally already selling Samsonite as well as Tumi.

So I think in the airports you may find sometimes that Tumi and Samsonite are being sold side by side. Now beyond that they're not much intention to combine them together.

But that does not mean the knowledge will not happen, as I said that Tumi does better in retail, Samsonite does better is wholesale. Now when we start to look at Tumi's business in Japan, I'm giving one concrete example there, we find that Tumi's presence in that departmental store in Japan or for that matter in Korea is far inferior to Samsonite, because we have better relationship with those departmental stores and we know that that part of the business much better than them.

So it is definitely our intention then we moved few of our good people from Samsonite team who are doing that departmental store business in Japan and Korea to now operate the Tumi's distribution business. The Tumi traditionally knows how to run single brand retail very well, but not necessarily how to operate in the departmental store.

And departmental store in many countries are still very important, like Japan, like Korea, like UK, but probably there are many other markets where it is less important. For example in the U.S.

likes of Neiman Marcus, Saks and Bloomies are as important as having a single brand store. I think our experience of managing those relationships could come handy.

But that does not mean the shop-n-shop of Samsonite will start selling Tumi, you know it would be just that we will use our knowledge and relationship with those buyers to get Tumi a better presence in these doors.

Thank you, Ramesh. Two more questions before we end.

Okay, here in front, please.

Hi, three questions please. The first question is the length of the purchasing cycle process various categories i.e.

travel, non-travel. Second question is it's very positive Sierra group investing in more A&P in Tumi, the question is how was Tumi able to achieve such high profitability investing on the 100 bps and 150 bps in A&P.

And the third question is profitability of e-commerce of the operating profit level? Thank you.

Okay, the proceeding cycling there are no real concrete numbers there, but generally we would like to estimate and believe that travel luggage has a replacement cycle of around three years, but it can get accelerated, when you launch a new collection, which is delivering consumer some great value or great design, we have seen consumer willing to come out and replaces luggage if we see that something great is getting offered to him. So very important in our business now are increasingly important our business is newness.

In the past I remember, we used to all believe that when I worked in this business for almost 18 years during the first regime of Luke was the Chairman of the company in those days I was heading Indian business, we used to say that we need to bring 20% of our collection should be new every year. When Tim came on Board we change that to 33% of our collections would be new, which are based on probably once in three year kind of a replacement cycle.

And now we're challenging ourselves, now we want 50% of our collection to be less than a year within all our doors, because that exhilarates consumers' willingness to buy a new product and not wait for the old products to give way. Non-travel on other hand the buying cycle with whatever estimates that we make it at our end is much, much shorter, generally a year.

People tend to change their everyday use bags every year because they're also more prone to following the fashion colors, fashion designs, and things like that, so to that extent also there was one reason why we have been so passionately under Tim's leadership of 11 years growing the non-travel from low-single digit to now coming up almost 40% of our sale, because that does help your business. Coming to A&P spend, quite honestly when I'm surprised.

I met the previous CEO of the company I said, what the fuck - sorry my language not so polite, said I mean, you did good numbers, without spending anything on A&P. I think let me give the credit to them, I think they did an excellent job in terms of choosing the retail locations.

And Jerome's believe was that the retail if you have good doors and they are well merchandize, managed by motivated staff, did themselves work as billboards. And of course, you look at it the current franchise of the brand is limited to people in the room here, all the bankers, investment bankers, and the consultants it almost become like a uniform for them.

And if your boss is carrying it, when you get a new job, you want to be like your boss. That also had the business, but we want to grow, because Tumi was a great business, $500 million, but we set a target for ourselves that over next handful of years, we see no reason to be more than $1 billion, so I cannot wait only the bankers and the consultants who buy me, I need to go beyond that and that communication cannot happen that you accidently land up into Tumi store and Wall Street and find out a product, I give you another example.

Tumi has now great women bags, just long two years back, they have only one collection called Voyager, which starts to contribute to 18% of their revenue. This is humongous number.

Tumi's luggage sales have dropped like no tomorrow, but nobody in the world saw that because you know the luggage technology has changed, people want to looking for lighter luggage, they could not produce that, but the overall number never reflected that. The luggage contribution for Tumi's business from around 75% six year back is now down to around 30%.

So the kept on losing that because of the technological embedment, hopefully we will cover that. But this women bag we just selling it, there's been some market research which done by them, where no woman ever visits Tumi store to buy a bag for herself.

This is one of the Tumi study, another consumer study they have done. The mostly land up in the store to buy a bag for the boyfriend or for the husband of something that and then also just accompanying her boyfriend, and she then discovers, oh Tumi as some great woman bags.

Now you cannot wait for that cycle to happen, you want to shorten that cycle by going out and communicating with the consumer, the next time when a woman wants to buy a good looking business bag, which is also functional she must consider Tumi as part of our brand consideration. So that is why what I would say that A&P can do to them.

And then there are markets like China, Korea and Japan where the brand awareness of Tumi is still is very, very low. Tumi's sales in Japan, is in single digit.

When you look at it there North American business would be around $300 million plus, there's no reason and the contribution of Tumi is 4% or 5% in Japan. Therefore any premium brand or luxury brand the number should be more like 25% going up to around 30%, 35% five percent.

But today the brand has not been invested in China, so if you want to wait and follow the Tumi's way of doing the business. I'm sure I will be retired by then, and I don't have that much spacing.

We won't be letting it.

So then we have to accelerate, and the A&P is the way to do it. E-commerce profitably, e-commerce I think long term we would look at it e-commerce profitability to be similar to the other channels.

Today it tends to be more profitable, but I would not like to guide anybody to look at it as e-commerce contributions in our sales grow, the profitability will keep increasing. Why I say that because the dynamics of the e-commerce it will also continuously changing.

So long term you would look at it that e-commerce growth will not be margin dilutive definitely, but it will not be margin accretive. Today as we speak, it's only 6% of the total revenue.

It looks that it is margin accretive, but don't start pending that over a longer term.

Great, final question from Ann here in front.

Hi, couple of follow-up question. First in terms of the price proposition - pricing propositions of your various spread revolver be quite these days, and how will you change you know on price propositions and especially on the high end brand names, like Tumi and also in a way Samsonite, and also like on the luxury names has been talking about price harmonization that globally so we do see the difference in terms of like Samsonite product or Tumi product in different markets, are we going to change that?

Secondly is regarding Tumi's core - let's say excluding this like inclusion of the hotel business, if I just look at the core business what will be the organic growth what we've been like. And then I forgot about my last question.

Price harmonization, Samsonite has always been implementing what we call as a pricing index that means the price between one reason to another reason or one country to another country within the same reason. We do follow kind of a price index, the price index would mean that our price could to have variants between plus to minus 10%.

I think that kind of a number is reasonably well accepted in our business. Because that's more on account of different weight which gets applicable in different parts of the world.

Coming to the other question about Tumi's core growth, let's say today when we look at the comp ratio, which is a good numbers to look at it the mid-single digit is what we should look at it coming out of Tumi, which is very similar to the Samsonite core business. The additional growth of Tumi that I'm saying that we will get to the double digit with Tumi is mainly on account of trying to grow the business in lesser presented markets, like Europe and Asia.

And also in lesser presented channels, which could also be U.S. for that matter or it could be lesser presented category, where in the past they lost market share in a very significant manner, which is in the luggage segment, which is because of that technological embedment which they suffered over the last couple of years.

We believe, we will be able to cover that for them and a new collection should be able to bring to the market in quarter four, another brand Tumi, so all that put together would allow Tumi to be able to deliver double digit growth in 2017 and next handful of years.

So for China, we start to see acceleration in terms of growth, on the B2B side on a C2C side are actually both?

I would say that if you look at channel by channel-by-channel, so you see growth coming back in e-commerce, growth coming back in B2 B business, there is also a small growth starting to come back in the departmental stores, departmental store can broadly divide them into two kind of departmental store, the departmental stores which are in suburban malls we start to see the traffic coming back. The departmental store, which are standalone in the premium of city centers they are still losing the market share.

So I think the retail doors, which are again in the suburban malls, the departmental store which are in the suburban malls starts to deliver growth. E-commerce and B2B are delivering stronger growth, but departmental store which are standalone still continue to lose some share, and the hypermarkets also still continue to see some loss of market share, which is actually been made good more than made good by e-commerce.

Great, thank you very much everyone for attending this results presentation. Thank you, Tim, Ramesh and Kyle for the presentation today.

Thanks.