Safilo Group S.p.A. (SFL) Earnings Call Transcript & Summary

Good evening, and welcome to the Safilo Group Full Year 2020 Results Presentation. 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 risks and uncertainties 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 a multitude of factors. Today's participants are Mr. Angelo Trocchia, Chief Executive Officer; Mr. Gerd Graehsler, Chief Financial Officer; and Ms. Barbara Ferrante, Director of Investor Relations. At this time, I would like to turn the conference over to Mr. Angelo Trocchia. Please go ahead, sir.

Hi, good evening, everyone, and thank you for attending today's conference call on the Safilo's full year 2020 results. Our focus today will be primarily on the business evolution of the last 3 months of the year and how this contribute to shaping our economic and financial results in the second half of the year. 2020 presented the most challenging market conditions we have ever experienced. And I want to express my utmost gratitude and really big thanks to all our people in the plant, in our offices around the world, for their dedication and the excellent job accomplished in such a difficult period of our lives. The health and safety of our people, including the opportunity to manage our professional and personal need with the greatest flexibility through an extensive use of smart working, were and continue to be our first priority. Considering the unprecedented market conditions deriving from the COVID-19 pandemic, I am satisfied with our economic and financial results, and with the ability of our organization to contain as much as possible the impact to our top and bottom line. I'm particularly pleased with our positive finish to the year. In the fourth quarter, the business environment became, again, very challenging as the second wave of the pandemic, in particular in Europe, brought along a fresh new wave of restriction and containment action. It was thus still complex marketplace in which we managed to grow our sales and earnings, leveraging on the same business drivers, which had provided for our rebound in the third quarter. Q4 benefited from the full contribution, seasonally more moderate than in the previous 2 quarters of our recent acquisitions of Prive Revaux and Blenders, with both businesses continuing to grow strongly their e-comm activity. On the other hand, in the quarter, our organic business, which exclude the impact of the acquisition, recorded a sequential improvement compared to the third quarter, which again primarily reflected the strength of the U.S. market and the capabilities of our local leadership team to better serve our U.S. customers in the independent optician channel. China and Australia were the other amazing growth driver of the period, which, along with the U.S., allows us to almost fully offset the persisting challenging market environment in Europe and in a number of emerging countries. Notably, Q4 further confirms the resilience of the prescription frames business during downturn and crisis. The product category, in fact, grew in the period while sunglasses continued to lag behind. The sales recovery we achieved in the quarter allowed us to register a meaningful recovery also at the adjusted EBITDA level and to finish the year ahead of our internal projection. Let's then look at our full year economic and financial outline and how the significant H1 business setback was followed by solid sales recovery in the second half of 2020. Last year, our total net sales fell by 15.2% at constant exchange rate, and the adjusted EBITDA finished slightly positive at EUR 1 million. Reflecting, as I said, the significant COVID-19 impact suffered in the first half of the year, followed by the sales rebound recorded in quarter 3 and quarter 4 net sales growing by 3% at constant exchange rates. In 2020, we made decisions in convention our cost structure to protect as much as possible on the bottom line, bringing home already last year the majority of the structure overhead savings targeted in our medium-term plan. On top, we have used the contingency measures made available by government around the world throughout this pandemic. In the fourth quarter, our adjusted EBITDA increased by 34.5% to EUR 15 million or 6.6% of sales, bringing the adjusted EBITDA of the second semester to a total of EUR 29.3 million, up 21% and confirming a margin on sales of 6.6% versus 5.5% in H2 2019. At the adjusted net result level, we moved from the net loss of EUR 63.7 million in H1 to a net profit of EUR 17.2 million in H2, which reduced the debt -- the group net loss of the full year to EUR 46.5 million. In 2020, we worked extremely to maintain a sound and sustainable financial profile for 2 key intervention. On one side, we secured additional liquidity for the group with a new term loan facility provided by our partner banks and guaranteed by SACE. On the other, we handled very carefully our net working capital needs via a prudent reduction of our inventory and an effective and balanced management of our cash collection and payment activity. I want to thank our clients and supplier for their support, as together we continued building a more sustainable business in such a crucial year. Our group net debt last year, including the IFRS 16 impact and the net cash out of EUR 111.8 million for the 2 acquisitions, was EUR 222.1 million compared to EUR 74.8 million in 2019. I'm also proud of the work done by our organization to advance on our medium-term strategic agenda. Last year, we remain focused on the strategic direction we set out at the end 2019 and on the business priority we gave ourselves to accomplish our plan. In 2020, we continued the work initiated in '19 to renew our brand portfolio, and reinitiated the overall of the production footprint, 2 key areas of our business model whose development needs to be coherent and equally efficient. Last year, we launched 4 new brands: Levi's, David Beckham, Missoni and Ports. And we prepare for launching Isabel Marant and Under Armour at the beginning of this year. Our teams did a great job on this front while also handling the phase out of Dior whose license agreement ended, as you know, at the end of last year. In a year in which e-commerce lead strongly in consumer relevance, our acquisitions of Prive Revaux in February and Blenders Eyewear in June, coupled with the significant progress of Smith's value of consumer business, gave a significant boost to the digital transformation strategy we announced in December 2019, representing a meaningful support to the sharp growth of our B2C business in 2020, which eventually boosted our total online business from 4% of our total sales in 2019 to 13% in 2020, getting to EUR 100 million. Digital was a very clear strategic choice we took before the outset of the pandemic. And in which last year, we increased our investment in 3 clear direction: B2C, B2B and social and digital market. Alongside the surge of e-commerce for the purchase of sunglasses, 2020 also confirmed and further market resilience of prescription frames through the independent optical stores. In the still rather restricted business environment, which characterized the fourth quarter, the demand of consumers and retail activities in the various markets continue to focus on optical frames, a product category which is a strategic priority for us and where we are working to excel in terms of product offer, service level, customer engagement and digital commerce. And for this very purpose, last year, we invested and accelerated our work to initiate a rollout, rolling new best-in-class B2B platform and the new customer relationship management system, able to reshape and enhance the relationship, the engagement and the way we do business with our many opticians in Europe first and in the rest of the world to follow, starting from the first half of 2021. On the front of our production footprint, last year, we also started to realign it to our current and future production needs, selling the Martignacco plant in Italy and initiating the rightsizing on the Longarone side as part of our restructuring plan to make our supply chain more efficient and in line with our business today and tomorrow. Let me now hand over to Gerd for the details of our economic and financial results. Gerd?

Thank you, Angelo, and good evening to all of you connected in call and webcast. I will start from our total sales performance, providing you with the numbers of the key dynamics already highlighted by Angelo. In Q4, our total net sales reached EUR 225.6 million, growing 3% at constant exchange rates, while down 2.1% at current exchange rates, given the significant appreciation of the euro against the U.S. dollar and the majority of the emerging currencies in the last 3 months of the year. Our positive sales performance at constant rates was again driven by the contribution coming from the recently acquired businesses of Prive Revaux and Blenders, which added EUR 14.1 million or 6.6 percentage points to the growth of the period; and by the sequential improvement we registered in our organic business without the acquisitions, which declined by 3.6% at constant exchange rates against a drop of 6.7% in Q3 and of 36.9% in the first half. If we then exclude the contraction of the production agreement with Kering Eyewear as per the contract, our organic wholesale business almost flattened in Q4 at minus 1.6% at constant rates from minus 5.5% in Q3. Our total net sales performance in the second half of the year was thus positive 4.5% at constant rates and plus 0.4% also on a reported level, with the organic wholesale business down 3.5% at constant rates. This latter business performance was driven by 2 very different trends: the decline, although much milder compared to H1 of sunglasses; and on the other hand, the high single-digit growth of our prescription frames business, confirming the resilience of this product category during downturns. As already highlighted by Angelo, the business recovery we achieved in the second half of the year was a meaningful result for the group, which allowed us to fill part of the H1 gap and to close 2020 with a net sales at EUR 780.3 million, down 15.2% at constant exchange rates, minus 16.9% at current rates with our acquisitions, bringing in EUR 61.8 million, and therefore, the organic wholesale business declining by 21.5% at constant exchange rates. Now as Angelo was previously highlighting, the consumer shift to digital, social and B2C e-commerce gave a significant boost to our total online sales, which almost tripled last year, reaching approximately EUR 100 million or 13% of last year's total business versus 4% in 2019. This sharp growth reflected both the significant contribution coming from our acquisitions D2C businesses, and the strong organic progress around plus 52% at constant exchange rates recorded by Smith D2C channel and by the group's wholesale revenues generated through Internet pure players. Looking more specifically at Blenders and Prive Revaux. Their performance in 2020 on a 12-month pro forma basis was strong, up together plus 66%, thanks to a plus 73% growth of their e-commerce activities, which represent 96% of the Blenders business and around 20% of the Prive Revaux business. Let me now move to our net sales performance by geography. And here, North America is confirmed as our key growth driver also during the last 3 months of the year. This is something we were already seeing and highlighting when we talked last time in November, and we are glad that the year ended in line with our expectations. As you may remember, the North American business had rebounded by 12.1% at constant exchange rates in Q3 and the sales growth we enjoyed in Q4, plus 8.9% on an organic basis, was an important confirmation of the dynamism of the U.S. market environment. This was again particularly evident in the independent opticians channel, where the greatest part of our business in the region lies and where, as mentioned by Angelo, we saw the fruits of the great job done by our local team there. This was a solid performance, which continued to be driven by our prescription frames business, by our key license brands, in particular, Kate Spade, HUGO BOSS and Jimmy Choo and also by the positive contribution by Carrera and Polaroid. The full picture of North America for the year, therefore, consists in a significant business drop in H1 followed by a second semester in which sales growth, calculated on an organic basis, ticked up to 10.6% at constant rates, limiting the decline of the full year to a minus 14.2%, which represented our best organic performance by region of last year. Including the contribution of Blenders and Prive Revaux, in 2020, our total net sales in North America grew by plus 4.7% at constant exchange rates after recording plus 27% in Q4 and plus 36.3% in the second half of the year. On the other hand, the business in Europe continued to be very challenging also in Q4, with net sales falling by 18% at constant exchange rates, 19.4% at current exchange rates, and minus 16% at the wholesale business level, excluding Kering Eyewear. Although with varying magnitude by country, the continent was certainly the most heavily impacted by the second wave of coronavirus infections emerging towards the end of October last year and by the reintroduction of restrictions on people's mobility and commercial activities. Lockdowns and a lack of tourism continue to affect, in particular, specialty channels like boutiques and travel retail, where sales generated through Internet pure players continue to register strong progress. The quarter also showed some recovery in order taking and wholesale activities from the big retail chains, which had lagged behind in the third quarter when their stock sufficiency prevented a sizable pickup of our wholesale business. Also in Q4, the negative sales performance was driven by a weak sunglasses business, the product category to which Europe is more exposed. On the contrary, prescription frames were very resilient, overall, flattish in Q4 and even growing in the contemporary segment. The year in Europe closed 25% down on constant exchange rates, minus 26.4% reported, as trading activities, as said, remained weak also in the second half of the year at minus 17.3% due to a subdued summer season affecting the sunglass business in Q3 and the second wave of COVID-19 undermining the recovery in Q4. Moving to Asia Pacific. The meaningful rebound we experienced in the region in Q4 was the other significant driver of our improving organic sales performance in the period, with the business up 28.1% at constant exchange rates and 24.1% at current exchange rates, from minus 45.9% in H1 and minus 6.4% in Q3. Our sales in China more than tripled in Q4, also thanks to the new brands we started to work with last year, namely Levi's and Ports, the latter being the new license we signed specifically for the Chinese market in June, and with which we started to operate immediately. In Q4, we continued to experience strong momentum also in Australia, where retail activities returned in most cases to normality and where we continued growing with our key brands, in particular, with Carrera Sun and prescription collections. Following its Q4 performance, sales in Asia Pacific grew by plus 10.6% at constant exchange rates in the second half of 2020, taking the full year decline in the region to a more moderate minus 20.9% at constant exchange rates. This business contraction was almost entirely explained by the drastic drop of the travel retail channel due to the extensive bans on travel. As a reminder, the travel retail channel represented around 30% of 2019 full year business in Asia Pacific. In Q4, sales trends also improved in the rest of the world, with the positive performance of Brazil and Mexico and the first signs of a recovery also in the Middle East countries supported a milder business decline of minus 6.5% at constant exchange rates, minus 19.7% at current exchange rates due to the strong euro appreciation, in particular, against the Brazilian real, the Mexican peso and the Indian rupee. While 2020 remained in these markets significantly depressed, totaling a minus 32.6% in constant currencies, the more positive exit to the year proved this still different but generally improving status of retail activities in the various countries of the area. Last year, now moving to our economic performance, the key driver of our operating results was clearly the sales development we have just discussed, which explains the significant operating deleverage we suffered in the first semester and its normalization in the second half of the year following the sales recovery. As highlighted by Angelo, in 2020 we remain strongly committed to taking all necessary actions to aggressively manage our operating expenses, a focus which allowed us to achieve in the year structural overhead cost savings of EUR 15 million, making significant progress in relation to our medium-term plan to reduce overhead expenses by a total EUR 20 million. On the other hand, in the context of the health emergency and of the subdued production volumes, there was little opportunity to progress on our procurement and manufacturing expenses, resting mainly on the available public contingency measures. In 2020, our total onetime savings in relation to the COVID-19 pandemic amounted to an estimated EUR 28 million, which mainly reflected applicable personnel relief programs around the world. As usual, we comment our economic performance on an adjusted basis, excluding the nonrecurring costs incurred during the year. In 2020, these costs equaled EUR 25.5 million, EUR 21.1 million in at the EBITDA level due for EUR 16.6 million to restructuring expenses related to the ongoing cost savings plan, and for EUR 8.9 million to charges incurred in relation to the termination of the activities and uncertain licensed exiting brands. As we move down the P&L, in Q4, gross profit stood at EUR 101.3 million, substantially in line with the EUR 101.8 million recorded in Q4 2019, with the margins still constrained at 44.9% of sales, although 70 basis points better than the comparative period. There was a mix of different dynamics explaining the industrial performance of the period, including more meaningfully a negative sales mix effect and some nonrecurring costs for obsolescence and write-offs of fixed assets primarily due to the exiting businesses. On the positive side, in Q4 and more generally, in the second semester, we had the accretive impact of the acquisitions and declining D&A due to the effect of the initiated manufacturing rightsizing. So let me say here that without the specific impacts just described, the gross margin in Q4 would have at least resembled the level reached in Q3 around above 51%. Recapping on how the gross margin moved during 2020 after landing at 44.3% of sales in H1 behind the significant decline of production volumes, it increased to 48% of sales in the second half, closing the year at 46.5% compared to 50.8% the year before. Full year gross profit stood at EUR 362.5 million, down 24% compared to 2019. Below the gross profit, in Q4, our adjusted EBITDA reached EUR 15 million, up 34.5% compared to the EUR 11.1 million recorded in Q4 2019 while the margin increased to 6.6% of sales from 4.8% in the comparative period. This improvement reflected the better operating leverage of the period, mainly in terms of royalties and advertising and promotional costs. These expenses were, in fact, positively affected by the conclusion of the negotiations with many of our licensors in relation to guaranteed minima on royalties and marketing, which are typically fixed cost components calculated on the previous year's business, which we could eventually turn partially into variable costs. On the other hand, I think it's worth mentioning that in Q3 and Q4, we recorded soaring logistics costs to move products, whether by sea, air or land, which climbed 24.5% and 40%, respectively, in Q4 and overall in the second half of the full year. At the same time, the second semester incurred the full additional costs, mainly of marketing and advertising, to drive the e-commerce sales associated with the 2 acquisitions. In H2, our group's adjusted EBITDA was up 21% to EUR 29.3 million, fully recovering the loss of EUR 28.3 million we recorded in the first half of the year and allowing us to close 2020 with an adjusted EBITDA of EUR 1 million. In 2020, selling, general and administrative expenses, excluding D&A, decreased by 13.3% compared to the prior year as we strive to contain the negative impact of the operating deleverage by accelerating the execution actions behind our overheads cost-saving program and utilizing the available contingency measures. In the year, depreciation and amortization, excluding the nonrecurring write-offs of fixed assets, declined by 10.4% compared to the year, mainly due to the effect of the manufacturing rightsizing previously mentioned, plus the lower organic investments carried out in the year. In 2020, our adjusted operating result equaled a loss of EUR 54.5 million compared to a profit of EUR 3.7 million recorded in 2019 and slightly improving versus the loss booked in the first semester as a result of the small adjusted operating profit of EUR 0.9 million recorded in the second half. The group's net result for the year equaled a loss of EUR 46.5 million, slightly better than the adjusted operating result as we benefited from a couple of specific items. On one hand, we reported increasing net financial charges, EUR 24.1 million versus EUR 7.3 million in 2019, mainly due to net negative exchange rate differences for around EUR 8 million and to higher net financial interest for around EUR 5.6 million due to the increased average gross debt. On the other hand, financial charges were more than offset by a positive accounting adjustment equal to EUR 19.8 million due to the reduced liability for put-and-call options on equity of noncontrolling interests. This specifically refers to Prive Revaux, taking into account the impact of the COVID-19 pandemic. The other positive impact came in the year from a total tax benefit of EUR 14.4 million, mainly as a result of the U.S. CARES, the Coronavirus Aid Relief and Economic Security Act, which provided us with the opportunity to carry back net tax losses. Moving to our financial performance in 2020. The key dynamics of our cash flow last year were clearly impacted by the economic deterioration we suffered in the year. Excluding the net investment of EUR 111.8 million for the acquisitions of Blenders and Prive Revaux in 2020, our free cash flow equaled a cash absorption of EUR 31.3 million against a negative flow of EUR 21 million in 2019. As Angelo has previously pointed out, last year, we gave the greatest possible attention to our working capital whose change finally resulted in cash generation of EUR 42.5 million, sufficient to fully offset the negative economic result of the year, allowing for a slightly positive cash flow from operating activities of EUR 0.9 million. Last year, the key driver of our positive net working capital dynamic was the significant reduction in inventories, a trend which prudentially continued also in the second half of the year after the tight control we placed on stock levels in the first most difficult semester. In Q3 and Q4, trade receivables increased as a result of the improved sales performance, but they remained a decreasing item on a full year basis as in the second half, we also benefited from a much stronger cash collection activity and improving DSO. On the other hand, in Q4, payment activities further normalized after some extended terms negotiated in the first semester. In 2020, cash flows for organic investments decreased to EUR 21.4 million compared to EUR 30.6 million in 2019. At December 31, 2020, the group's net debt stood at EUR 222.1 million compared to EUR 74.8 million in 2019. Excluding the impact of IFRS 16 and of the acquisitions in 2020, the net debt stood at EUR 67.2 million in 2020 and EUR 27.8 million in 2019. If we look at the components of the group's net position at the end of the year, we moved from a gross debt, which equaled EUR 311 million as at December 31, of which EUR 43 million is the IFRS 16 impact; EUR 93.5 million the house shareholder loan, which we drew for the acquisitions; EUR 108 million the term loan facility guaranteed by SACE; and EUR 65 million, the renegotiated term loan facility signed in 2018; and then some other long, short-term borrowings for about EUR 1.4 million. We then closed the year with a cash position of EUR 89 million and our EUR 75 million revolving credit facility undrawn. I stop here. And I hand over to Angelo for his further remarks on the business evolutions after the year-end. Angelo?

Thank you, Gerd. Thanks very much. The global pandemic did not stop us from pursuing our strategic goals. Quite the opposite. The advanced -- we advanced our portfolio transformation, we expanded our presence in line to consumer business, and we continue to build Safilo into a leader organization, achieving 75% of our original overhead cost saving plan, well ahead of target. We now need to continue working on the realignment of our manufacturing capacity to the current and future production needs, taking further action. Considering the challenging market scenarios under the pandemic, we are still dealing with -- we are now required to take further steps in the direction of our industrial plan to have a more efficient and competitive industrial footprint, able to guarantee the recovery of a higher -- on a higher gross margin, elevating our group economic and financial solidity. With this purpose in mind, we have today communicated the start of the process for the intended closure of the Slovenia factory in Ormoz. We are now opening a discussion table with the local trade union and authorities in order to identify all the useful solution to mitigate the social impact on the 557 people affected by this painful decision. The business environment at the beginning of 2021 remain affected by the contaminant actions still in place in many countries to halt the spread of COVID-19 and the uncertainties over the scale and timing of the expected rebound in consumer demand across the different geographies. Our business in January and February was in line with our expectations for a more moderate start to the year compared to the positive trend recorded at the beginning of 2020, while the first 10 days of March confirmed a significant acceleration versus the same period last year, the first to be highly impacted by the consequence of the pandemic. Sales performance in this month continue to be driven by the positive business environment in the United States, the strength of the online business and the more significant recovery of emerging markets, while a number of countries in Europe and the travel retail business in Asia remain weak spots. Based on the current market condition and visibility on the order book, today, we expect our group's total net sales in the first quarter of 2021 to grow in a high single to low double-digit range, at constant exchange rate compared to quarter 1 2020. We continue to maintain a prudent stance on the prospects for the current year, waiting further market evidence for a normal summer season to materialize. The main assumption of our work today rests on the opportunity for our business, both owned and licensed, to effectively compensate the discontinued existing activities and on the continuation of our cost productivity plan, to recover this year a more positive economic profile. This concludes our presentation, and we are now ready to take your questions.

[Operator Instructions] The first question is from Cédric Rossi of Bryan Garnier.

I have 3 questions. The first one is regarding the Blenders Eyewear. So your prescription offering that you were launching last year, I just wanted to know if you had first feedback from your customers, what was their reception? And since buying prescription online is still a pushback for many customers, would you consider distribute the prescription offering at your physical customers, for instance? Is it something you could consider in going forward? The second question is just a clarification. So Gerd, you mentioned a high single-digit growth for your prescription offering. Was it in H2 or in 2020? And last but not least, my last question was regarding Isabel Marant and Under Armour that will be launched this year. So have you changed anything in the launch plan or regarding the positioning or the footprint because of the COVID situation?

Okay. I would try to answer the first 2 and the last, and then I'll leave it to Gerd, the third. I mean, in terms of Blenders, look, we have launched the RX both in the Blenders -- on the Blenders side and on the Prive Revaux side. The first results are encouraging, but it's going to -- we need to have a little bit of time because the Blenders proposition currently is more sun, and obviously, the prescription is not sun. So we get -- we have got quite a positive feedback from the consumer, but I don't think this is going to be so far. So it will grow. I think it will work, but we need to have at least 6 or 7 -- 6 or 8 months to start seeing a reasonable number. In terms of the second question, if your question is, if we think to have an [ RX ] proposition also towards the opticians, I don't know if I got it right, this was the question. So not only on the comp, we are evaluating -- we are testing a pilot project in Europe, which will go live in quarter 4. So we will see there what are going to be the result. About the launch of Isabel Marant and Under Armour. No, I mean, we didn't change the strategy according to the COVID, no. The 2 brands have 2 completely different strategies. Isabel Marant is French, from Paris, luxury and is focused mainly on France and north of Europe. So it's a brand that we are going to manage and launch, let me say, with a limited scope in terms of geography and execution. On the other side, Under Armour, we just launched in U.S. and the first feedback are very, very positive. So no change, but just a more geographical attention to some of these license. Gerd, up to you.

Yes. On the prescription frames, the high single digit, that is the half year 2 growth rate, which has further accelerated in the fourth quarter. And this clearly is -- has been carrying the business and also continues to carry the business now as we are in the first quarter.

The next question is from Domenico Ghilotti of Equita.

I have a question on your last statement, so on the target for 2021. So basically, you are saying you're targeting to compensate the discontinued operation. And well, first of all, if you can give some color on what was the contribution of discontinued operation in 2020 to get, let's say, a sense on the bridge? And then if you had any contribution in Q1? I know that the license -- or the main license expired. But just because the initial performance in the first 2 months, this offset would be quite strong considering that you are now, let's say, without this contribution. And the second question is on the profitability side. How are you planning budgeting for market in Spain in 2021 compared to 2020 in general compared to the historical trends?

Yes. I'll take the first stab at it. So in terms of 2021, let me say that, clearly, in 2020, the exiting licenses of our portfolio, they have been declining compared to a year ago even more than the total rate of decline. So let me say that a large part of the exit, if you wish, has already materialized in 2020, clearly exacerbated by COVID. We expect that the level of sales that we had in 2020 on the exiting licenses, and here, I mean, both the exit of Dior, the exit of Max Mara, and let's say, a half year impact on Fendi, because Fendi, as you know, will expire in the middle of June. That total amount of 2020 will be offset with the incremental sales -- or let me say, with the total pro forma sales of the 2 acquisitions on the 1 side. And then within the organic business, we have also the new licenses that are coming in. And clearly, Under Armour and Isabel Marant are completely new, while the others, they were already there in the 2020 base. So we expect that exiting and entering business will offset each other, which means that the result of 2021 on the balance will hinge upon how much of the COVID-related drop can we offset on the existing portfolio. I would say that in Q1, we are off to a good start. So clearly, the kind of range that we are expecting is positive looking versus last year, looking also versus 2 years ago, but there is a lot of uncertainty. There's a lot of clouds that, I think, we all know when we look at the market. So difficult to say. But at the end of the story, it will depend on how much COVID recovery we can record on our existing underlying business. In order to achieve that, clearly, we do need to invest again in marketing. Last year, we have taken down, clearly, the level of spending as much as we could. We are assuming to grow them again this year, as we are expecting also our business to grow again. I think you can roughly assume that we will continue investing as the same percentage of sales as the sales go up. And then on our new acquisitions, Blenders and Prive Revaux, as you know, our marketing investment percentage is significantly higher on the e-commerce business. And as we continue to grow those exponentially compared to the rest of the portfolio, I think you will see the total marketing spend in '21 to continue to go up.

And I think just as on the qualitative comment, parking Blenders and Prive Revaux otherwise, obviously, the number becomes misleading. Now in the plan 2021, almost even more than 70% of our media investment goes on digital. So we keep pushing on this significant shift. So not only, as Gerd was saying, the market investment will go up according to the growth of the top line, but we keep shifting more and more towards digital channels.

Okay. A couple of follow-up. The first is on the closure of the Ormoz plant. I'm trying to say that this was something already planned, so already in the plan that you presented, even though not disclosed clearly. Or if it is on top and if you can give us a sense of the expected savings that you are projecting. And the second follow-up is on working capital. I was, say, a bit concerned by the decline in -- so the trend in receivables and in payables. I intend to understand if there is a pullback that we should expect in 2021 from working capital absorption.

I will answer the first question. No, we had an overall supply chain reset when we presented our plan in -- back in '19. But obviously, we didn't have a specific action plan for Slovenia. So there was obviously a study which was trying to look to the different options. Why Slovenia? I mean, first of all, Slovenia comes after we have done the intervention last year in Italy. The closure and the sale of Martignacco, the rightsizing of Longarone. And then we felt now that also due to the COVID -- due to exit of the some license and due to the COVID, we don't have any more sufficient volume base to keep the factory -- to leave the factory alive. And that, we have taken this decision. On the savings, Gerd, I don't know. I don't think we communicated that, right?

No, we don't communicate the exact savings. But I think what we can say is that in the strategic plan of 2019, we outlined that we wanted to save approximately EUR 25 million from cost of goods sold. Clearly, in 2020, we were not able to realize meaningful savings because of the situation. So our ambition is now in 2021 and in 2022 to bring home those EUR 25 million savings. And the operation that we are doing in here will also give, let me say, a small contribution to that, but it is not the main purpose. The main purpose is simply that the asset is no longer utilized because of the volumes we have and because of the technological obsolescence of the technology that we have there. And secondly, you should also assume the restructuring cost eventually, of course, will need to be discussed and negotiated with the respective social partners, with part of the original EUR 50 million that we outlined to the market in December of 2019. So it is part of that framework, that we say. On the working capital, let me describe a little bit the trends. I think on the receivables side, I have to say that the year turned out much better than we would have feared in the depths of the Q2, when we didn't really know how the world would go on, and we were afraid that we would probably face some difficulties on the cash collection. I think, on a full year basis, we actually managed to slightly decrease the DSO. Our cash collection activities have progressed well at around the second half of the year. Yes, we've had to provide additional bad debt provisions, mostly in emerging countries because clearly, some customers have been in more difficulties. And we do have, still, a level of overdue that is somewhat higher than it was pre-COVID. So clearly, next year, on the one hand, it is right that we should expect receivables to build up as we expect also sales to come back. But on the other hand, we still have the possibility to collect some of the overdue that we have to manage, let me say, carefully and patiently with customers as they're recovering. On the other side, on the payables side, we did -- let me say, we did have a negative flow there from payables in the fourth quarter. This is driven by the fact that up until September, we were working a lot with our suppliers to extend payment terms as we were trying to also bridge the gap until we obtained the SACE guaranteed financing. So we stretched the working capital in attendance of the financing, which eventually came in September. So in Q4, we largely normalized the payable levels, and we are basically back to where we used to be before. While the inventory, we have kept quite tightly under control for the full year. So next year, I do expect also because we have some stock of exiting brands, which is clearly going to go out because it's the close out sales period, I do think we need to continue being careful on the net working capital. But I don't think that it will be a very negative item in the cash flow of 2021.

[Operator Instructions] Mr. Trocchia, at this time, there are no questions registered, sir.

Okay. So thanks very much. Thanks to having been with us this evening, and have a nice time. Thanks very much. Have a nice evening. Bye-bye.

Bye-bye. Thank you.

Bye. Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.