TOM TAILOR Holding SE

XHAM:TTI

Earnings Call Transcript 2018-Q2

[Operator]

Dear ladies and gentlemen welcome to the TOM TAILOR SE investor and analyst call on the accession of the company's half year results 2018. At our customer's request, this conference will be recorded. [Operator Instructions]

May I now hand you over to Viona Brandt, who will lead you through this conference. Please go ahead, madam.

[Viona Brandt, executive]

Thank you, and welcome also from my side. Today, we have a little different setup in our presentation. Besides the management board, which you all know, we have a special guest today, our Global Vice President, Digital, Stefan Wenzel. Welcome, Stefan. And he will give you a short overview later on the eCom business and the first half year, and he will also be available for the Q&As later.

But now I would like first to hand over to Heiko to start with the presentation.

[Heiko Schäfer, executive]

Yes. Thanks a lot, Viona. Ladies and gentlemen, thanks for taking the time today with us.

To start off straight away, to give you the headlines. Our views were moderately satisfied with where we ended up in the first 6 months, especially with the development of our brand, TOM TAILOR. We outpaced the market again, gaining share across the channels from competition, especially in wholesale and retail, and we turned the trajectory for our eCommerce business. And as Viona was indicating, Stefan Wenzel, our VP Digital, will give you a little bit of a deep dive there. We've also seen first green shoots for BONITA after a very disappointing first quarter. So we're going to talk a little bit more about how we see that panning out.

If we move to the summary page, the summary page on the presentation exactly. So again, after accounting for the RESET closure effects, which Thomas will again explain later on in detail, TOM TAILOR has -- the brand has outpaced the market in the first half year. The German market -- overall textile market has been shrinking 2% in the first half year. We have actually been growing 1.2%, especially driven by our wholesale business.

In Q1, only our TOM TAILOR Retail like-for-likes were slightly positive. You see 0.3%. Wholesale has been slightly decreasing in the second quarter only, and that is mainly due to extreme clearance effects that we had in the comparable quarter last year. So in Q2 2017, we had to clear a lot of excess inventory, which drove our top line but destroyed bottom line. So accordingly, you're going to see a positive development on the gross profit side this year in the second quarter.

So overall, to go into the channels. Wholesale, strong performance in Germany, again; strong performance globally versus competitors, taking share and improving gross profit. Retail, we focused on gross margin with flat sales essentially. And eCommerce, as I was saying, turned from a growth of minus 20% in the first quarter to a growth of plus 4% in the second quarter of this year, so quite positive.

We continue our internationalization for TOM TAILOR to reduce the dependency on a difficult core market in Germany. Actually, the share of German sales declined 1.2 percentage points, which we see as a way to manage our risk here.

And -- which Liam will lead you through, Liam Devoy, our Chief Operating Officer, we also took the final big milestones for our SAP implementation. So while others in this market are really struggling and spending an excessive amount of money and then stopping the program, we are concluding it, and we're staying roughly within budget. Liam will give you more details later on.

So talking a little bit about -- I think on the EBITDA and gross profit side, Thomas will walk you through the details. So I'll stay then on the BONITA side. After a weak Q1, we've been growing like-for-like 1.2%. That's, for us, a very positive sign. And we've seen further gross margin improvement by 1.5 percentage points in Q2.

So good overall, but we acknowledge that, of course, the transformation continues. This is not a home run, and we need to be realistic here regarding expectations. We're going to be back to normal inventory levels by the end of this year. We will have our collection modernized heavily, and you're going to see some pictures of that. And we'll have a much better assortment mix in the stores by the end of the year.

But again, it's a longer-term fix, and it will take some time and effort. So overall, group EBITDA is roughly EUR 22.7 million in Q2, above the EUR 21.9 million from last year in Q2. And just to reiterate that we have no change to our financial guidance so it's confirmed.

Taking you into the details and the operational business highlights of the first half year now. You've certainly seen the numbers, those who follow the trade press, minus 2%. You see it on the left-hand side here. It's a good April but then May, June and even July, not very positive. By the way, the same was true for the Austrian market, which is another big market for us.

So the market is as tough as always, but -- and that's what you see on the right-hand side. We outperformed the market. I've mentioned that already that, especially, this is driven in the first half year by our wholesale business. Again, when it comes to the normalization because there are certain revenue that we cut off deliberately with the RESET program that will not be repeated, you need to normalize for that. And again, because we think that's not always well understood, Thomas will walk you through the details later on.

A bit of a deep dive on the wholesale since that's always been a growth driver for us and to show you a bit of competitive figures and also to explain why we are so positive on our development in the first half year. We've shown you here a bit of syndicated market research data on the left-hand side. So just to be clear, this is not TOM TAILOR data. This is data that we get from trade panels, in this case, KATAG data, to show you how we have been doing sellout-wise. So this is sales data by the German trade.

You see on the left-hand side how the market has been doing, and we differentiate between men and women. Men, slightly up; women, down. You see us highlighted here, plus 6% on the men's side, plus 14% growth on the women's side, and again, sellout data. And then you see the comparison here to our main competitors. So Competitor II to VI, all big brands, we have not taken small companies here. These are all main big competitors, some of the stock listed. And you see how they've been doing compared to us in the first half year.

So just to be very clear, we are taking market share. We've done that for the last 2.5 years, and we're planning to do it again. So the message here is our product works. It's confirmed by the panel data. You see it in KATAG and even [indiscernible], which was the second source. Basically, the direction is similar to what we are seeing here.

One comment is that this is including our Denim division. The Denim division per se has not been developing as strongly as our casual division. And I'm going to talk later about why we think this is a big opportunity for the next 3 years to come.

Moving on then. Another positive factor is the development of our eCommerce business. And to walk you through a few details, I would hand over to Stefan Wenzel who's joined us a bit earlier this year, who's been growing gray hair but brought [indiscernible].

Stefan, please explain a little bit about what you've done.

[Stefan Wenzel, executive]

Yes. Thanks, Heiko, and good afternoon from my side to everyone. As you know, just a little bit of context, we operate eCommerce in 2 business models: it's direct-to-consumer and it's business-to-business.

So with business-to-business, we leverage the dynamics of the platform economy. With direct-to-consumer, we obviously secure consumer or customer relationship which is a strategic asset. A good fashion eCommerce operates at the intersection, if you will, of arts and science, which means, on the one side, we need high level of personalization that leverages our technology stack, and that needs to be coupled with on-brand user experience. And over the last weeks, we've made good progress with regards to that.

So on my first slide, I've just highlighted a few examples. So we've heavily improved the personalization, again, leveraging technology to drive relevancy for our users, telling users what is most likely appealing to them based upon past behavior.

But also, on the right side, you see leveraging technology to drive segmented promotions rather than promoting content via a very broad approach. And the intersection of on-brand content, you see in the middle, we've improved brand curation a lot because we fundamentally believe that the direct-to-consumer play in the world of a fashion brand needs to have -- needs to provide best possible on-brand content. So good progress with regards to our direct-to-consumer value proposition.

If you go to the next slide, let me just dig a bit deeper on some of the things that I found when I entered the company in the second part of the first quarter. So when you see the performance in Q1 at a negative 20% year-over-year, and Heiko and the board shared some of those insights in the last earnings call already, there were quite a few challenges on our technical side of the equation. So the natural priority #1 of me joining the company had to be to stabilize performance, reliability of the platform. So we did this successfully.

To give you a metric, we measure error messages that occur during checkout, and we had a relatively high percentage of checkout attempts entering into error messages. We completely extincted that, so that came down to 0%.

We managed to improve our user experience, improve navigation, the joy of use for our audiences to interact with our site. We improved on-site search and made sure that, overall, the experience both on mobile and on our best top shop has progressed significantly.

That enabled us to also starting to invest again into customer acquisition. So the direct-to-consumer business relies on a healthy customer base. And whilst we improved the technical stability of the platform, we set ourselves into the position to start again the acquisition of new buyers.

So in Q2, we managed to attract 20% more new buyers than we had in Q1. So Q1 actually was 5 points negative year-over-year, and we accelerated to plus 20% new buyer growth. And this came in a bundle with, obviously, also getting our whole performance marketing play and the foundational work progressed.

The replatforming that we've been talking about over the last weeks and the associated issues also affected our B2B marketplaces business. And again, the fixes that we implemented for our direct-to-consumer business also helped to stabilize our B2B marketplaces business. And to give you one metric that's more tangible, we managed to get approximately 30% more SKUs live across all of our more than 50 marketplaces by making sure that the interfaces behind the curtain, between our -- information management systems, and our platforms are reliably up and running.

That's a whole bundle of activities that went on since I entered the building, and it's been coupled with setting up the foundational work also with regards to team and setup. So we've been successfully changing the way we operate, changing the setup and hiring new people that add capabilities in core areas, where eCommerce obviously needs it. And that's all along the lines of data, product technology work, performance marketing but also CRM.

The effect of this and a lot more that's been going on in the background, as you can see on the right side. And as Heiko mentioned, coming from a highly negative trajectory in Q1 with minus 20% year-over-year, we accelerated by 24 points to a plus 4% in Q2. Obviously, that's not yet maxed out. So e-commerce obviously has more opportunity.

And I'd like to close just with a quick bottom line summary. So entering the company and seeing the state of play, I would say the maturity level of the eCommerce operation is relatively low, and we have started to change that. So I'm super positive about the opportunities ahead both in direct-to-consumer and in our B2B eCommerce business. And that's not just in Germany, but there's also ample opportunity outside of Germany. And that's what we will continue to talk about over the coming periods.

Thank you very much. Back to Heiko.

[Heiko Schäfer, executive]

Yes. Thanks a lot, Stefan. I guess we're going to get some questions later on, so I'll directly move on to the next page. Talking about our internationalization.

I think what's interesting and important for you to understand is what we've always said about our strategic priorities, selective internationalization is one of them because we want to reduce our dependency on a hard, tough, not really growing market in Germany. And we've put some numbers for you for the first half '18 compared to '16, because that's pre-RESET, to illustrate where we're going here.

So remember, pre-RESET, the 2016 numbers, you still have all the revenues that we generated in the operations that we've closed, Asia, the U.S., South Africa, some other markets that we've withdrawn from. And you see that the share of German business was still at roughly 60%, 59%. That's been shrinking to about 56%. So again, to reemphasize, we want to reduce our dependency on the German market, which we are doing.

To give you a few tidbits from the second quarter. We've seen solid and good growth in Russia, especially in our retail operations. Austrian retail was positive like-for-like. And we had retail positive like-for-like, sometimes even double-digit, so 13%, 14% in markets like Hungary, Romania, Bulgaria. So overall, Go East, as we call it, is one essential cornerstone of our expansion direction. But please remember we always said we expand where we know the brand works and where we can operate profitably.

One other big thing that we've not completely concluded but taken really a big step forward and successfully taken the step is our SAP rollout. And Liam Devoy, our Chief Operating Officer, will walk you through the situation here.

[Liam Devoy, executive]

Thanks, Heiko, and greetings from my side as well, ladies and gentlemen. I guess I'd start off by saying I think we can remind you that one of our core values here at TOM TAILOR is to commit and deliver. And I think what I'll take you through now is a good example of our journey of committing and delivering throughout the organization.

So just as a refresher of the phases we've gone through regarding our SAP program, we had an explore phase during 2016. Then we have a series of fast and agile go-lives starting with FiCo, and we successfully brought live our TT GmbH Wholesale & Buying at the end of August 2017. Notably, we had our first quarter close with SAP FMS in Q3 of 2017. Then we brought back -- brought live the smaller of our 2 major divisions, Denim. We did our first step of a sequential go-live. We had purchase-to-pay go-live in October of 2017, delivery started in January of 2018, shipping and invoicing to our customers.

Then now, bringing us more to the present, we brought forward additional functionality for our TT Woman and Men on time. We have done purchase to pay on that side of the business in casual in February 2018. And then almost right now, we've actually brought the biggest part of the delivery component of our casual business live in July. And almost simultaneously, we're now doing the delivery -- the ordering component of our NOS, never out-of-stock business. So overall, key takeaway, a series of successful go-lives with minimal disruption to the business.

And then I would take you on to where we will go next. So if you go to our next slide, and we talk about -- our whole goal is that, as we move into 2019, we're actually beginning to fully optimize SAP & PLM, which you may have heard me speak about previously, our Product Lifecycle Management software, and beginning a set of subprojects around merchandise planning and assortment planning. And those things will take place in 2019.

And then lastly, to leave you with this, is that I don't want to overstate it, but I think Heiko mentioned it as well, and I think there's been some news lately about large, notable, hundreds of million euro projects over 5 to 7 years that have been announced as being canceled. I think for the size of our organization, it's an absolute testament to our teams from senior management all the way through the organization, no matter where they sit, that this has been a very successful program overall to date, still work to do though, I guess.

Back to you, Heiko.

[Heiko Schäfer, executive]

Thanks a lot, Liam. Then lastly, we want to talk a little bit about BONITA. Remember, the [indiscernible] in the first quarter was not such a positive one. We had a pretty difficult first quarter for BONITA, minus 14% on a normalized basis. We've seen a growth now or a healthy development of plus 1.4% in the second quarter. Obviously, overall in the first half year, we are still negative, but we've seen a good second quarter comparing it to the first quarter here.

Nevertheless, the cleanup work continues. We are still working through excess goods -- or excess inventory, sometimes dating back to a couple of years ago, but we're going to be finished with that by the end of the year. Second quarter was also positively affected by switching back some full-priced stores that we had to use for clearance back to a full-price model. Obviously, helping with gross margins here.

We have a sales performance program that Norbert Steinke has been launching together with the teams, so training our sales staff. We haven't done that for a long time now. And we've tested a new store concept, modernizing stores. By the end of the year, we're going to have about 74 roughly modernized. We've adjusted it in the meantime. So we test and learn, and that's the mode that we are using for BONITA.

The next big milestone starting now, in September, will actually be modernized collection that has the handwriting of the new Chief Product Officer, Raphael Heinold. It will be launched into the stores. So that starts in September. As you can see from the pictures on the right-hand side on Page 11, it's a bit -- not a bit, but it's actually fundamentally more modern than what we currently have in the stores.

And it's not only about the looks here. It is also about the more consciously steering the assortment mix, so the mix of, for example, T-shirts versus pants, versus dresses. Historically, BONITA was really very heavily a T-shirt brand. You all will remember the flowery piece that we sold a lot of them, not always at the right time though. We are correcting that moving forward. So we'll -- the balance will go more towards categories like dresses, pants and jackets, obviously also driving up the average ticket size, yes? So again, that starts in September now.

And to manage your expectations though, in order to test that and learn and make adjustments, you obviously need to take a few months here. So really, to see sort of learnings incorporated from the first test now, we're going to be talking sort of 2019, potentially midyear, yes? So good quarter overall for BONITA, yes, compared to the first quarter. Are we completely having a home run here and can declare victory? No. The transformation will continue.

Having said that, I think what interests you most are the actual -- is the actual financial data, which Thomas Dressendörfer, our CFO, will walk you through now.

[Thomas Dressendörfer, executive]

Thank you very much, Heiko, and also, welcome from my side. I'll just lead you very quickly through the highlights from Page 13, and then we'll take a deep dive into each of the divisions.

As you saw from Heiko's chart before, the TOM TAILOR brands in the first half year has been growing by 1.2% in a very difficult market. And obviously, if you take Germany, I'll call the number, it was minus 2% on the overall market. So we are performing pretty good compared to the rest of the market. Of course, we're going to continue to grow going forward, and we'll see, hopefully, even better numbers.

On BONITA, after, let's say, a bad start with Q1, we have managed to stabilize the sales at a plus 1.4% in Q2, which is also a pretty good development. Most importantly, and this is what we are very proud about is the gross margin development. We'll go to each of the numbers later on. We had a number last year of 59.7% gross margin, and it went up to 64.1%, confirming that we are going to grow, yes, and we're always going to grow profitable. And it's always going to be with good gross margins because that's what's most importantly -- most important for the business.

And the key reason that it goes through each of the segments is that -- the reason for the increase of gross margin is due to better discount management, discount management as an example being that we give less percentage on our product. We have less sales months, sales weeks, sales days. And we give, let's say, the discount selectively into the product book. So not 40% across all product categories, it's just on T-shirts only or trousers and so on. So just some better control of discounts, improving the gross margin.

The second reason for the improvement of the gross margin is my colleague, Liam Devoy, who's been working on the sourcing. He's done an incredible job over there changing the sourcing structure. And let's say, new countries, new suppliers, reducing the suppliers, so many, many things resulting in a big jump of the gross margin. So again, an example where you see that this company, in all the departments, we're working hard all over the place to improve the profitability of the company.

On the EBITDA, in Q2, we had -- despite increased marketing expenses of close to EUR 4 million, we've managed an EBITDA margin of 10.8%. Just as a small reminder, our guidance is 10% over the full year. So with Q2, we have demonstrated that a margin of 10% is possible or 10.2%. Needless to say that despite the increase of the gross -- of the marketing expenses, we're above last year's EBITDA margin.

From all what we see, from all the measures we've been putting into place, all the sales growth initiatives, we strongly believe that we will be able to manage the guidance what we have given out, so the 10% EBITDA margin or roughly EUR 900 million of sales. Please keep in mind -- I'll make an extreme example. We had plus 40 degrees for the last couple of weeks, we're going to have minus 28 degrees in -- from September to December. There may be an impact on the guidance, just -- we are in extreme weather. But from all what we see, and I think Q2 has hopefully given you the comfort, we strongly believe in the guidance for 2018.

I would also highlight the cash flow. Be it operating cash flow or free cash flow, both of these numbers we've increased significantly versus last year. We've increased marketing expenses. We have increased CapEx significantly to EUR 17 million, and we are still managing to increase our free cash flow up to EUR 27 million. So again, confirming that this company is a cash-generating company going forward and is worth investing.

So in summary, we are continuing our financial consolidation of the company. I've mentioned all the points, strong gross margin. We're investing into the business. We have good margins, the margin on the range what we anticipated. The cash flow is going up. Net debt reduction is down to EUR 136 million, net debt-to-EBITDA ratio of 1.6. We are fully aligned with our internal plans to consolidate this company, and we'll deliver on that, what we promised.

I'll move on to sales. And I'll just repeat that what we started in Q1. We have, for 2018, the reported numbers. We will not change reported numbers. What we're trying to do in this chart is to normalize 2017 numbers by taking out all the RESET impact.

I'll bring you an example. In TOM TAILOR, we closed 55 stores. So if you were to compare 2017 versus 2018, you have to deduct the sales of these 55 stores in 2017. And you look at this chart in the center, you see stores, you see a number of EUR 4.9 million in Q2. So this is the number we have to correct, the previous numbers. And that applies for the brands, be it kids, be it countries, be it BONITA store divestitures, BONITA Men divestitures. So in total, you have to deduct EUR 18 million from the 2017 Q2 sales to adjust for these numbers.

Moving on to Page 15. I'll just focus on the numbers. So this is, I'd say, taking these numbers and putting that into normalized 2017 sales. You see that, in Q2, we had on TOM TAILOR marginal, more or less flat, margin decline. On BONITA, we had a 1.4% growth. So these are the like-for-like numbers adjusted for the RESET measures which we've been communicating since 1.5 years.

Okay. Let's make a jump into the numbers itself. So on Page 16, you'll see sales, gross profit, EBITDA and EBIT. Sales, you've seen the numbers before. It is minus 7.8% on reported numbers. But if you take a like-for-like comparison, it is plus -- minus 0%. Again, I have to repeat that in a very difficult market, where Germany is declining by 2%.

On the gross profit, there, the focus is really on the gross margin. We had 59.7% last year. We have increased to 64.1% due to the, let's say, measures which are described before. And on the EBITDA, we have a margin of 10.8% versus 9.7%. Please keep in mind that in the 10.8%, we have a huge jump on the marketing -- marketing expense increase because we want to reinvest into the business, and this will hopefully help in the second half year to boost the sales further. Reported EBITDA, we are online with last year, 6.3% versus 5.9%. So overall, a very good performance in Q2.

Very brief jump now on the segments. We had, in the Wholesale, a marginal decline. This is mainly due to some special sales last year, 2017, which we have not corrected for. The numbers are fully in line with our internal expectation. More importantly, again, if you look at the gross margin, we're jumping really up from 45.7% to 54.7%, really, let's say, supporting again the focus on profitable growth. So we're really taking -- we are really focusing on wholesale partners where they can make money, but more importantly, we can also make money.

On the margin, 9 point -- EBITDA margin, 9.5%, 7.8%, demonstrates again that also with the -- let's say, with the Wholesale business, where everyone says it's actually boring and not interesting and you're losing money, it is not true. You can make a lot of money, and it is a cash generator for this company with, let's say, low-risk approach.

On the retail, there, we have for the first time since -- for quite some time, we had a slight growth on a like-for-like basis. Again, in a very difficult market where the retail business is suffering, where the traffic is going down, where stores are closed, we are managing with operational excellence, with many other things, plus growth opportunities outside of the German market. We are managing to grow this business slightly.

Similar message on the margin. Not as impressive like on the Wholesale but still we've managed to increase it by close to 2% from 63.6% to 65%.

On the EBITDA margin, we had some, let's say, incremental expenses, which will -- which slightly dips the absolute numbers. But that's -- overall, that has been anticipated. It has been in our plan. So things are fully in line with what we have been expecting.

BONITA, we have, as I said before, like-for-like growth of 1.4%. We're continuing the margin improvement that we described last year, how these are being managed to really improve the gross margin. We can further improve the gross margin by cleverly playing with discount and the sourcing approach. We're up to 72.4%.

On the EBITDA, we are, meanwhile, at -- in Q2 at 14.7%. Please keep in mind that BONITA, as Heiko described before, is -- this is a bumpy road. We're changing -- let's say, we're changing a lot in this company. We will have good quarters and we'll have bad quarters. It's going to be trial-and-error approach. But you have to have the confidence in our management. We react very quickly, and I think BONITA is a very good example. Q1 was not good. We reacted immediately, and we've taken the right measures. And we've come up with [ a better Q2 ]. Whether Q3, Q4 or next year will be the same, we'll see. We'll do our best to manage this business.

Last but not least, before I wrap up with the half year result, operating cash flow has been up. Very clear that we have good results. Everything is working. We are up by approximately EUR 10 million, which is a big number. You see on the interest page, the first impact of the refinancing we've done back in April, where we have new interest positions, new interest rates. And of course, we are, let's say, lower on our net -- total debt situation, so we are reducing our interest step by step.

On the CapEx, we've always said we want to invest -- reinvest into the business. The main driver for this increase, which is warranted, are the store refurbishments in -- with BONITA, but we also have other investments in the TOM TAILOR brand area. We need to boost the business on a long-term basis. Overall, the free cash flow increased by EUR 5.5 million, confirming that TOM TAILOR, that this business can make a lot of free cash flow going forward.

I'll just finish off with -- I'll jump the normalized net sales adjustment. You can have a look in detail. But I'll just wrap up the half year, which is on Page 22. We have a slight decrease with BONITA, of course, first quarter, which is impacting our overall performance in the first half year. But nevertheless, it's just minus 1%, more or less flat versus last year despite, let's say, a bad BONITA performance which we've compensated.

On the margin, you see gross profits, we're increasing our, let's say, story on a full year -- half year basis 56.5% to 60.8%. And on the EBITDA, we are -- despite marketing investments, we're improving step by step and getting the numbers up. And the EBIT, again, profit -- many companies in the textile business did not have positive results in the first half year. We do have positive results on EBIT level in the first half year.

I'll finish off with the guidance. So there, from our point of view, taking into account the Q2 performance; taking into account all the measures we have put in place; taking into account all the sales initiatives, be it in Wholesale, in retail and in eCommerce, we believe that we can manage our guidance where we said there's going to be slight increase compared to prior year. We've talked about raising approximately EUR 900 million. And forgive us if it's a plus, minus EUR 10 million around these numbers. Gross profit, you have seen that we have improved the numbers. Let's say it's going to be a moderate increase versus prior year. We've basically delivered that. And on the reported EBITDA, we strongly believe we will manage the 10% what we have given out as a guidance, subject, of course, what I said before, if there are major changes in the climate or something. This, we can't anticipate.

I would like to hand back to Heiko.

[Heiko Schäfer, executive]

I'd like to give a little bit of an outlook because some of you have obviously asked us, so that's all great. Now where does growth come in the future. We're not going to go through each and every detail. But to give you a little bit of an idea, again, on where that will come from, I'll take, let's say, 5 minutes to explain that.

So very briefly, you all know our environment, yes. It's difficult. We have a slow organic growth in Europe, especially Western Europe. We are operating, as Thomas was saying, in a market with high volatility, and we ourselves are in a particularly interesting spot of that market, the mid-market. That's a cutthroat, competitive environment.

But to be very clear, it's the biggest segment that you have in the textile market, and if you look at it overall, it's not shrinking. So it's a big, stable market. And as you've seen from the first half year data when I talked about the panel data, we do believe we've got a lot of opportunity to take more share from our ailing competitors.

So how are we going to do that? There are, let's say, 3 -- if we move on to the next page -- 3 essential thrusts that we are using here on how to grow. The first one is, we call that growth from the existing core. So we've, I think, explained enough on how we are -- or how we've refocused us and the company on the healthy core. The big thing here is that core alone has got a lot of potential to generate more top line growth and more brand consideration because a lot of the things that we do today, and you all have heard, I've given you examples, are done still on a very low professionalism level or maturity level, yes?

Talking about the way we plan. Stefan has explained how we start just now to deliver personalized landing pages on our eShop, personalized promotional offers, being able to identify customers when they visit us. So we have barely started really on the omnichannel journey. So within any -- everything we do today, there's a lot of potential to develop that, utilizing, especially, data and more analytical capability than we have today so we can grow the existing core. I'm going to give you some examples on the next page.

The next thing here, professionalize for profit. Thomas was speaking about our efforts to protect margins on the sourcing side, to be more careful with markdowns. Again, a lot of that today is being done on Excel spreadsheets and with rolled up sleeves. Utilizing data to optimize our business for more profit is something that we are again just starting now, the way we manage markdowns, the way we manage our product costs and overhead.

And the last thing, in addition to that, there are obviously fields that will enable us to grow that are adjacent to the core, geographies and additional segments. So that's really incremental in your revenue that I'm going to talk about in a second.

So do what we do today, just much better in the next years, conquer adjacencies. And in all of that, stay lean and hungry, which we are certainly. If you see me, you would confirm that.

Next thing, what does that mean now? And I cannot go into each and every specific strategic project that we have because there are a few. But to give you a few examples here, growing the existing core is one -- I talked about sort of data-based and data-driven assortment planning, merchandising and CRM. That's one area. We have done a lot of analysis on how we show up from a product category mix perspective in retail. This is now TOM TAILOR. For example, TOM TAILOR historically is a T-shirt-focused company, as BONITA is by the way. And especially in high-value categories like pants and jackets, we are absolutely underrepresented. So we need to improve our ability to, let's say, penetrate the higher-value categories within the existing core.

Another thing is we're doing fantastic product with a high-fashion degree, but it doesn't land in all points of sale. And even in our own stores, we sometimes don't put it properly into the windows. So improving these aspects and transporting our fashionability to every consumer touch point is something that falls into that category, too.

Professionalizing for profit. I think we've talked about that. Pricing and promo analytics. We're going to utilize a bit of, let's say, algorithm-based intelligence, especially on the promo and markdown side, starting now. So we're doing a little bit of a project with external support on that. And we also have more ability to utilize the agility of our supply chain when we talk especially about quick response products or basically applying the model that Zara is using on some of our ranges in our own channels.

The adjacencies that we can grow really incrementally then, obviously, one big area is online. And I think Stefan has given you a little bit of an indication where we're going. But internationalizing -- so firstly, growing our online business in the core market and internationalizing our online business is one big topic for the future. That will entail investment, but that's why we've raised capital.

Second thing is, and I think I've talked about it a couple of times, is growing our women's segment under TOM TAILOR brand. Again, for those who haven't heard me saying that before, we have a roughly 50-50 split, women versus men business. The women's business is already growing stronger. But we are still underrepresented on the women's side, especially when you look at the comparison to the total market where about 2/3 of the spending is done by women.

We have identified 4 specific categories where we can grow, and I don't go into every example yet. But stay tuned. There are some things that are very tangible and that we're absolutely convinced of that can deliver a pretty significant growth number over the next 3 years.

What we titled Be Millennial here is essentially bringing our TT Denim division back on the growth trajectory where we want it to be. It's been about 11 years on the market and for the last 5 years stagnating. Actually, in the last half year, we're not very happy with the development. It has to do to some extent with how you go to market, especially in the wholesale environment because what we see from our data is that the buying consumers are actually younger. So we get the consumers that we want. We have the right product, but we have not reached the distribution and the penetration, especially in wholesale, that we want to have.

And then lastly, Go East. I think we've talked a lot about going into the markets where we know that we're working well, Eastern -- Central and Eastern Europe and Russia to start with and then potentially further east when we've got our plans firmed up. Across channels, one big driver of that also in Central and Eastern Europe is our outlet business. So that's an individual channel in itself that will grow pretty significantly over the next 3 years. With all of that, we're very confident that we can realize the ambition that we communicated before, so more than 12% EBITDA and close to EUR 1 billion, most likely more, in 2020. But stay tuned for more news in the second half.

So summarizing, key takeaways. I think we've made it very clear. TOM TAILOR brands sales continue to grow. We're gaining market share in a tough market. Our internationalization continues. We're reducing the dependency on the tough German market. After teething problems, we've brought our e-commerce business back on the growth trajectory, not completely yet but we are having the right momentum here. Obviously, also supported by heavy investment and Thomas pointed that out when he talked about the increased marketing expense. Some of that was going into online channel. Some of that is obviously brand marketing that we've communicated before.

We've taken the final big milestone with SAP pretty smoothly so far. Fingers crossed, that this continues. If I compare ourselves to other players in this industry, then we're actually faring very well. Again, the Q1 specific operational issues in BONITA have been addressed. We've seen a good second quarter. Overall, gross margin has increased. We see OpEx savings due to the effects of RESET. And again, our guidance for 2018 has been confirmed. More updates on our 3-year plan to come in the second half of the year. We're looking for good times out here to communicate a bit more detail to you.

Having said that, I would close here and open it up, I guess, for questions.

[Viona Brandt, executive]

So we are now ready for questions.

[Heiko Schäfer, executive]

Operator, please open the line up for questions.

[Operator]

[Operator Instructions] The first question is from Volker Bosse of Baader Bank.

[Volker Bosse, analyst]

Volker Bosse of Baader Bank. I would like to start with the e-commerce. So could you remind us regarding your multitenant functionalities? What is to come in the second half? And where do you see the most urgent need for improvement? And I agree, the 4% eCom growth in the second quarter is a great achievement given the shortfall in Q1. But what would be the growth rate for the second half, the normalized growth? I think the 4% has also room for improvement, as you also stated. So what can we expect in the second half and for next year regarding online sales growth? And the second question, regarding your physical store portfolio. Could you please remind us on your run rate of store expansion plans for next year, for example, by brand and by region, what is to expect? And also, are further store closures needed to get a kind of net figure in regards to store expansion? And finally, on your guidance, Mr. Dressendörfer, I know you're the man of a clear word so I'm struggling with your wording in the press release this morning saying a moderate increase in the EBITDA margin compared to previous year is forecasted. Now in the presentation, you were more clearly saying above 10% EBITDA margin. Why there is this mismatch, I mean, 9% last year means 100 basis points improvement. I would not call 100 basis points improvement as a moderate improvement. I know a lot of companies in this industry who would call 100 basis points margin improvement as a significant improvement. So perhaps you can clarify what you want to tell us with your wording in the presentation as well as in the press release.

[Heiko Schäfer, executive]

Thanks a lot. I'll start off with e-commerce and store expansion. You're always asking very good questions, I have to say. Starting off with omnichannel briefly today and then Stefan may say something about what's to come. I mean, what we have activated today are essentially 2 main things. The first one is our -- what we call Order-in-Store that went live 2017, I think, in April, where if you don't find the color or size in the store, you are able to order it on an iPad in the store and have it shipped to your home destination. We are seeing, roughly speaking, an order every other day on average in Germany. And it's a positive trajectory. So the numbers are actually going up. We've been at 1.5 orders per day already. But it's a learning curve. Our VP of Retail, Alexander Kaczmarczyk (sic) [ Andreas Kaczmarczyk ], for the German market is really working heavily on penetrating that. So Order-in-Store is the first one. We have like "click & collect" and "return to store" already. We had to deactivate that temporarily because of the in-sourcing of the eShop. But Stefan can talk a little bit about when we will bring that back live and what more is to come. I will, after Stefan has commented, get back to your question about growth and expectation for the second half year next year. So Stefan, maybe you want to say a few words about what's to come on the omnichannel side?

[Stefan Wenzel, executive]

Yes, absolutely. So Order-in-Store, as Heiko said, is live, and we're optimizing as we go. Availability of products through the app needs to improve. So there's a few things that we still have room to improve on, and we're doing that. Order-in-Store -- sorry, "click & collect" is indeed on our roadmap and will be prioritized against other line items on the roadmap. I would say medium impact overall. So therefore, it's not the #1 priority. But it may well be that we manage to get it out the door back in H2. If not, I would dare to say it will be the early part of next year latest. Again, the way we look at this at the omnichannel perspective is through the lens of customer value. So identifying projects that are focused on value to the consumer, not so much on technology and not so much on what's hyped up in the market. At the moment, we are flushing out our roadmap to deliver omni capabilities through user-centered approach, which are the specifics as and when they are ready. But that's an important work stream that we're busy with at the moment. In terms of growth rates, the 4% is approximately half of what the market is. And obviously, we are aiming to get back onto or slightly above market growth. That means we are trying to put ourselves onto a low double-digit growth trajectory. And that's basically the trajectory that we are aiming for.

[Heiko Schäfer, executive]

So Volker, just to reiterate that, obviously, we don't want to go out here with numbers because that's our internal planning. But what Stefan Wenzel said, we are aiming for an accelerated growth rate in the second half of the year, very clearly expecting to get basically back to market trajectory for the next couple of years to come. We expect that growth rate to rise significantly. So we will outperform the market in the next years. But given where we start from this year, we need to be realistic for the second half of the year. But more than the 4% for sure. Your question about store expansion. I wouldn't basically segment it into individual countries. But you can think about probably a two- or threefold distinction. The first one is we are going to be opening up stores as part of a strategic expansion plan, especially in Russia, yes. And we're talking, depending on how the performance is and the availability also of good locations. We're talking, let's say, 10, 15, maybe 20 stores per annum, potentially more. But we need to be also careful because it's about finding the right location. So Russia really is the only market where we will see a big -- bigger growth in stores. In other markets, you will see closures that Thomas will talk about and selective openings, especially for brand TOM TAILOR. We'll probably have a few openings in Austria. We'll probably have a few ones in Southeast Europe. But not in the excess -- in the extent that we're seeing in Russia, yes. For BONITA, the only things that we will open are outlets because that is what a normal retailer actually has. And the outlet to full price relation that we have for BONITA is today completely out of whack, yes. So that's sort of the opening part. For the closures, I'll hand over to Thomas to talk about that.

[Thomas Dressendörfer, executive]

Okay, we have basically 3 types of closures. First of all -- the first one is BONITA. We've always said we want to go down to 650 stores. Beginning of the year, we had approximately 800 stores. So there is a plan over the next 2 years, which is going to -- it should end by end of 2019 because I see a base around 650 stores. This could be plus or minus 20 because of some stores, improved performance, all these things. We're going to ask, keep the stores, if they decrease [indiscernible]. But there's a defined project behind that. We have the locations. We have the contracts. We are in discussions. We have signed several of the -- many of the lease terminations already. It will be natural closures without additional cost on this going forward. It's not going to have any kind of impact. The second type of closure is more on the TOM TAILOR side. We have approximately 10 to 15 stores, mainly in Germany, which are loss-making. The challenge there is that we have up to 10-year, let's say, lease contracts. They're going up to 2024, '25. Getting out of these contracts is going to be very costly. So we are negotiating very hard with the landlords to get out of these contracts with a, let's say, onetime payment. I'll bring you an example. Last year in Q3, we booked a total of EUR 3 million for the [indiscernible] in Hamburg, which we closed and we're getting out end of this year. The contract would have gone until 2024. These things will happen, and they will be opportunistically because we've got to wait and see. It's all about negotiations. If you go out and say we will close 15 stores, you're going to pay a fortune. If you, let's say, start negotiating and bargaining, you're going to get a much better deal, and that's the approach we're taking. So 10 to 15 stores opportunistically over the next 2 years is what we're planning. And the third category, which basically is the normal operational process, we have stores which are not profitable. We're going to close and we're reopening some rails, things which happen basically every week. There are shopping centers coming up and others are going out and things are changing. But this, I will not put into any kind of calculation. This is just normal daily operations, closing down, opening up things or -- I'll bring another example. In Russia, we have a list of 2, 3 stores where we say we opened them 2 years ago. It doesn't make sense. Business plan didn't work out. So we've closed them. But this is not -- nothing special. So really big focus is BONITA going down to 650 stores and 10 to 15 stores with TOM TAILOR, which we'll, let's say, work on an opportunistic approach. Guidance, last question, categorizing on moderate, strong, significant, this is not defined by me. This is defined by IFRS. So I have to rely on my [indiscernible] our auditors. If they give me this wording, I just have to accept them because that's -- they are the authority, not me. And as you said, in a context like that, where we are talking openly, I'm more clearer. That's the big difference between these 2 things. And I don't have the auditors sitting here on the table.

[Volker Bosse, analyst]

Yes, but if you have 10% EBITDA margin as your guidance in mind, the accountants cannot forbid you to mention the 10%. Why speaking about moderate increase? It's 10%. I really don't get it.

[Thomas Dressendörfer, executive]

Let's take it offsite. Let's say there's obviously a world outside there. We have strict standards which we have to follow. The press release is now based on these things. They offer clear rules in this country or all over the place. So I have to comply with that. And the beauty about our, let's say, discussions on our earnings call is that it is open and we can give you more guidance. So I would really work on why is the wording different and blah, blah, blah. This is just these are the words.

[Operator]

Our next question is from Christian Salis, Hauck & Aufhäuser.

[Christian Salis, analyst]

I've got 2 questions. So first on the decline in EBITDA at TOM TAILOR Retail. So I assume this was largely driven by increased marketing spend. So could you, yes, maybe quantify this a little bit more? How did you -- how much did you spend in H1 and in Q2? And is it fair to assume some EUR 2 million maybe in Q2? And what can we expect in the second half of the year? And then the second question is on your inventory position. This increased again in the first half year following, yes, a strong decline here in 2017. So is this increase according to your expectations? And what can we expect here in the second half of the year? Can we expect inventory levels to decline again?

[Thomas Dressendörfer, executive]

Okay. Just very quick on retail. The key reason why we are declining on EBITDA, you just have to look at the absolute gross profit. We're declining there by approximately EUR 2.6 million, and we have not been able to offset that on the cost structure. So that's the main reason. We've increased the margin. Yes, this is good. But the absolute gross profit has gone down, and that's just falling through this bottom line. The -- of course, there are some marketing expenses behind that. But marketing expenses is also on the wholesale area. So it's a mixture of 2 things. On the inventories, last year, it did not take -- to put it differently, 2017 has been influenced by a lot of onetime impact due to RESET, some of them inventories, write-off of inventories, all those things. So it's difficult to compare 2017 to 2018 on the inventory. What I can say going forward is we have meanwhile set up a very professional organization internally. We're working on inventories. We're streamlining the warehouses. We're getting -- with SAP, we have a much better overview on where we have what product, in which warehouse. So all these things should help over time to improve the inventories. Obviously, it's going to be a big topic, improving the working capital, improving -- reducing the inventories. All that will happen. Can I give you a number? No, I will not give you a number.

[Heiko Schäfer, executive]

Maybe just to comment. You have to take into account, you've got 2 counter -- counter-balancing effects here. The first one is we are getting -- excuse my French, we are getting rid of old [ s*** ], yes. So old stuff, excess inventory that is 2, 3, 4 years old. That is especially true for BONITA, to some extent also for our outlet business in TOM TAILOR. And at the same point, we need to up our inventory of fresh products because we are growing again, yes. So you need to take in mind that in the areas where we are making money, we need to basically have the right stock for expansion again. So that is 2 counterbalancing effects. But Thomas is obviously right. We're putting a little bit more intelligence. But I wouldn't expect a long-term inventory reduction trend here.

[Operator]

The next question is from Andreas Riemann, Commerzbank.

[Andreas Riemann, analyst]

Two topics. First one on the sales guidance. So what is driving the sales increase in the second half 2018 that is implied by the guidance? And related to that, when is the point in time when the negative sales impact from RESET or store closures will see the peak? That's the first topic. And the second topic, probably for Stefan, your own eCom business has improved but you didn't provide numbers for wholesale online. So the question is, how is this business performing? And also related to that, assuming that marketplaces will have most of the traffic in the future, what are the measures to make sure that you are a relevant partner for marketplaces going forward? These would be my 2 questions.

[Heiko Schäfer, executive]

Yes. Thanks a lot. Let me start off by asking -- by answering your first question. What are the drivers for the sales growth in the second half of the year? First one is obviously, we're expecting a growth in our online channels, also an improved like-for-like position in the retail channel. Keep in mind that some of the things we've developed last year and partially even this year are going to take effect only in the second half of the year. I'll give you one example. All the things we're doing with regard to a quick response, so basically leaving open to buy and responding to trend in a quick manner is something that we're really ramping up in the second half of the year. We've put a lot of energy in the first half of the year to generate returning customers, meaning addressing them directly, making sure that through targeted promotions, they come back in the second half of the year, mainly focus here on the German market and some of that will bear fruit. And lastly, we see a very strong development also in our wholesale business within the core markets. So we're expecting an uptick above our expectations on the wholesale side but also through international account acquisition. I may have mentioned it in earlier calls, to give you one example, that we are starting our relationship with [indiscernible] in September. We're going to see TOM TAILOR product in those spaces. So some of these effects of, let's say, a little bit more aggressive sales activities and customer acquisition will bear fruit in the second half of the year. The -- to your question regarding online wholesale marketplaces, I'll start off and then hand over to Stefan for a brief answer. Online wholesale usually is part of our entire e-commerce space, yes. We sometimes reported it separately but it's managed out of one hand, so through Stefan's team. And it's a business that is very profitable, yes, overall. And that is developing quite well. Obviously, the growth on the marketplace side is higher. But for us, at least the profitability of classical online wholesale is higher. And we're still having a couple of accounts that we're serving quite successfully through that model. Why are we positive that the marketplace business will -- let's say that we are well prepared for the good growth we have seen and are still seeing on the marketplace side. Obviously, it's about how you manage your rankings on the website, how you make sure that you show up in the top buy box. Stefan can give a bit more detail. But we are also, to some extent, consciously investing in making sure that we come out at the top ranks on the marketplaces for some of our partners plus, as Stefan was mentioning, fixing some of the operational problems that we had in the first half of the year where we just didn't show the product that we have on the marketplace or weren't able to deliver. Stefan, is that fair to say?

[Stefan Wenzel, executive]

Yes, that's a good summary. I mean, in short, the online business is where we obviously sell inventory into the wholesale partners. And complementary inventory, we add to our marketplaces' format. The trick on marketplace is pretty obvious. The large platforms are adding more supply than they are adding demand. So the battle for exposure, for visibility is increasing on those platforms, and that's what we are doing. So we're focusing on getting our listings optimized, making sure that the on-site searches of the respective platforms identify our products, so make sure that they are visible in the on-site search of the respective platforms. And we're partnering with platforms to make sure that we also push through platform marketing visibility of our ranges. We are live on more than 15, I think, in fact, 17 marketplaces. So we are quite advanced with regards to participating on the dynamics in the platform space already outside of Germany.

[Heiko Schäfer, executive]

Was there one open question from Riemann?

[Andreas Riemann, analyst]

Yes, one question on the peak related to the negative sales impact from RESET and store closures. Is it now the point in time where you would say this is the peak? Or any color on that would be appreciated.

[Thomas Dressendörfer, executive]

If we look at page -- we have the presentation on that. You see on Page 14, you have all the effects. I'll just speak now for the total company and without separating. So the full year impact last year was EUR 69 million. So you need to correct 2017 by EUR 69 million. Now in the first half year, we already have EUR 43 million. So the remainder of EUR 26 million is going to come in the second half year. So the like-for-likes will be easier. And you can -- at the end of the year, it will be very -- it's going to be normalized. So they're not big impacts now coming in Q3 and Q4. Just EUR 26 million in total.

[Operator]

Our next question is from Jurgen Kolb, Kepler Cheuvreux.

[Jurgen Kolb, analyst]

Stefan, here again on the e-commerce business. Maybe you could share some KPIs with us. What really drove that switch in this disappointing performance in Q1 to the much better performance in Q2? Are we talking about additional customers? Are we talking about conversion rates? Are we talking about less broken up purchasing processes? So maybe some details would be helpful. And where do you think you can take that going forward? And then for Heiko, maybe a quick question on your strategy that you laid out in one of the last pages or slides there. You indicated that there is obviously some significant growth in one area. Was that just related to Denim? Or was that an additional element you were focusing on? Maybe just one clarification word here. And in this respect, one element I was missing a bit in your strategy and your whole layout was where and how you plan to improve the brand image of TOM TAILOR. Where and how do you think you can do that later on or improve it? And lastly, also one for Mr. Dressendörfer here on the cash flow side. Maybe you can help me with that Page 13. Maybe I misunderstood your comments there when you said the cash flow improved. What specific cash flow were you looking at? Because when I look at the half year cash flow number on generated from operations or cash provided by operating activities, H1 '18 over H1 '17 deteriorated. So have you made some adjustments here? Or what are you talking about here specifically? That'd be helpful.

[Heiko Schäfer, executive]

Let's start with Stefan first on the e-commerce side. Maybe a few tidbits on which KPI has been dropping.

[Stefan Wenzel, executive]

I think the most impressive one is the error rate. So of all sessions, on any given day, we generated up to 1% of error messages in our checkouts. So of all sessions, nearly 1% ran into issues during checkout and different reasons for this. So we had issues around updating inventory. So the information provided through the shop itself wasn't accurate and so forth. We had payment loops. So technical issues related to the platform and surrounding systems. And we simply got rid of that level of error messages. So from nearly 1% of all daily sessions down to literally 0.0 for the last couple of weeks, which on the reverse side means that performance in terms of conversion obviously has been picking up. And as I said earlier, that has been coming hand in hand with scaling acquisition of new buyers. So again, we dialed up acquisition of new buyers predominantly through performance marketing. Why is that important? Because you need new buyers onto your customer database in order to then generate forthcoming purchases over the next months. So those 2 effects are a good summary of what happens. Stability of platform on the one side coupled with scaling acquisition of new buyers and obviously activation of existing buyers on the other side, those 2, I think, were components of the flywheel.

[Heiko Schäfer, executive]

Then to address your question on the main growth drivers for the strategy, there are actually a couple of ones that I would consider major ones. Obviously, if you talk about our online business, that's going to be a big, big growth driver, yes. I'm not going to go into numbers yet. But that's obviously one thing. The growth on the women's side through adding wearing occasion that we're not addressing today is going to be an additional big driver. I'm talking like a solid double-digit or in the end, maybe 3-digit million euro figure here. But that comes over time. But Denim is actually probably rather going to be a smaller one compared to the first 2 ones that I've been mentioning, yes. So there's growth online, growth on the women's side, growth through the internationalization, especially eastward. Denim, I would take a little bit back. And don't forget the first 2 priority buckets that we've mentioned relate to doing what we do today better, and that can also drive a significant growth. If you want to single out initiatives, then it's online, the women's side and the internationalization. Your question about brand image, you're spot on here. It's obviously important for us. Our consumers are brand oriented. There are 3 main levers that we have pursued and will continue to pursue. So no change with strategy here to improve our brand image, and we measure that through a KPI that's called brand consideration, yes. The first lever is the classical image marketing campaign that we started last year. You may have seen Say Yes as a slogan for the positive attitude. We've had a TV commercial featuring that and then a special focus on bottoms in March and April this year. That was quite successful. We're going to have a little bit of TV activity again in the second half of this year, and we're going to have a bigger one again early next year, all around the idea of having a very positive attitude. So it's image marketing and it relates to having a positive attitude. So that's why we say, Say Yes. By the way, with all of these activities last year, we improved our brand consideration by about 0.6 percentage points while the entire competitor set has been deteriorating, just to mention that. The second lever are the collaborations with outside partners that we run. You've seen the first one starting second half of last year in collaboration with Naomi Campbell. That's where we have the second capsule in the market just now. And we're going to have another one, I think, towards the end of the year and then what we started earlier this year with Revolverheld, the Hamburg-based band, pop band where, let's say, we have the first capsule in the market -- in the collection just now in August. So you're going to see it when you go to our web page, landing page. You're going to see that there. And that is just the start of that, yes. Basically, these collaborations where we have a pipeline of partners to work with will continue over the next years, obviously, costing money but nevertheless so far it has been paying off very well. The third element is how we show up at the point of sale. And that's why I mentioned we need to do what we do better. That has to do with the way that we look at -- that our windows in the stores look like, the way that our products and merchandise in the stores and also how it shows up at wholesale partners where sometimes I'm absolutely not happy with the way that we're being displayed. So 3 elements, image marketing, we'll continue what we started. Collabs, more to come. And the third element, you have better visual merchandising and better display of our product and brand at the point of sale.

[Thomas Dressendörfer, executive]

Okay. To finish off, the cash flow. I think maybe I was not so clear. I've been talking about Q2 cash flow. That's very clear in the presentation. And in the half year report on Page 14, we have the numbers for the half year and we also say the reason for that. We had a very bad start with Q1. What we're trying to say is we're catching up. We're catching up considerably and we'll offset the impacts from the Q1. So we are on track. The numbers I've showed is Q2, and we had a lot of investments that if you take the half year, we have approximately EUR 60 million of investments, which, of course, is sitting in the free cash flow.

[Jurgen Kolb, analyst]

Okay, okay, understood. Sorry, that was Q2 only. Very good.

[Thomas Dressendörfer, executive]

I'll tell you next time more clearly to avoid any kind of misunderstanding. The report is very clear on that. We were fully transparent.

[Heiko Schäfer, executive]

Ladies and gentlemen, I think we need to close it as we're running overtime. Our apologies. But just for you to be aware, we're going to be out on roadshows. Thomas is actually starting this week.

[Thomas Dressendörfer, executive]

Now.

[Heiko Schäfer, executive]

Exactly, now. I'm going to be out next week, and we are very happy to meet all of you when the time comes to talk a little bit more in detail about what we're planning to do. But we have to cut it short now because we all need to move on to other meetings. So thanks a lot. Operator, I'll let you close the meeting, and we're looking forward to you -- to meeting you again very soon on the roadshow or in the next call. Thank you.

[Operator]

Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.