Slide 1: 1Q19 Financial Results Presentation
1Q19 FINANCIAL RESULTS PRESENTATION WARSAW 28th May 2019
Slide 2: Disclaimer
Disclaimer This presentation (the “Presentation”) was prepared by LPP SA (the “Company”) with a due care. Still, it may contain certain inconsistencies or omissions. The Presentation does not contain a complete or thorough financial analysis of the Company and does not present its standing or prospe
Slide 3: Agenda
1 . 1 Q 1 9 f i n a n cia l r e su lts 2 . K e y c o r p ora te e v e n t s 3 . 2 0 1 9 o u t lo o k GLOBAL ASPIRATIONS 3
Slide 4: Growth continues
Growth continues 1,724 STORES +11.4% LFL 24 +15.7% COUNTRIES GROUP REVENUES +47% +8.4% E-COMMERCE m2 GLOBAL ASPIRATIONS 4
Slide 5: 1,724 stores in 24 countries
1,724 stores in 24 countries No. of 31.03.2019 YoY 33 @ stores 331 @ 16 @ LPP GROUP 1,724 -4 20 @ 8 Reserved 451 -7 1@ 920 @ 19 @ Cropp 365 - 12 78 @ 93 House 320 - 12 53@ 6 25 @ Mohito 289 -2 1 24 @ 49 @ Sinsay 274 + 38 3 14 23 Outlets 25 -9 xx Number of stores @ Internet stores 2 1 1 2 1 GLOBAL AS
Slide 6: Further LFL and e-commerce growth
Further LFL and e-commerce growth LFL DYNAMICS ON-LINE SALES (local currencies) (PLN m) 15.2% 12.9% 14.6% 252.2 11.4% 9.2% 192.2 178.5 146.4 150.5 6.2% 130.9 4.6% 3.6% 2.3% 84.8 74.8 54.9 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 • LFLs were positive e
Slide 7: Growth in all brands
Growth in all brands REVENUES BY BRANDS 1Q19 FLOORSPACE (PLN m) (by brands) Reserved 813 + 12% YoY ths m2 1Q18 1Q19 YoY Cropp 233 + 11% YoY LPP GROUP 1,000.9 1 085.4 8.4% House + 20% YoY Reserved 561.0 609.7 8.7% 204 +10% YoY Cropp 127.7 134.3 5.2% Mohito 179 House 110.9 115.0 3.8% + 31% YoY Sinsay
Slide 8: Floorspace growth in all regions
Floorspace growth in all regions REVENUES BY REGIONS 1Q19 FLOORSPACE (PLN m) (by regions) Poland 922 + 6% YoY ths m2 1Q18 1Q19 YoY LPP GROUP 1,000.9 1,085.4 8.4% Europe 478 + 30% YoY Poland 511.5 513.9 0.5% CIS 420 + 23% YoY Europe 235.0 287.4 22.3% CIS 247.8 277.1 11.8% ME 7 + 67% YoY ME 6.6 7.1 7.
Slide 9: Group revenues continue to grow
Group revenues continue to grow GROUP REVENUES REVENUES/ M2 (PLN m) 2,500 16.0% 13.5% 21.8% 15.9% 16.0% 20.2% 12.8% 10.4% 15.7% 25% PLN (monthly) 1Q18 1Q19 YoY 2,000 20% LPP GROUP retail 521 510 -2.1% 1,500 15% Poland 562 525 -6.5% 1,000 10% Europe 520 500 -3.9% 500 5% CIS 444 491 10.5% 0 0% 1Q17 2Q
Slide 10: Gross profit margin influenced by US$/PLN
Gross profit margin influenced by US$/PLN QUARTERLY GROSS PROFIT MARGIN AVERAGE QUARTERLY US$/PLN FX LEVELS IMPORTANT FOR SETTING SS19 PRICES 59.7% 4.1 56.9% 58.0% 59.9% 3.8 3.8 3.8 3.8 3.6 3.7 3.6 51.0% 49.0% 3.6 45.6% 45.1% 3.4 43.4% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 1Q17 2Q17 3Q17 4Q17
Slide 11: Operating costs under control
Operating costs under control COSTS OF OWN STORES/ M2 SG&A COSTS/ M2 (IAS17) (IAS17) -5% YoY - 1% YoY 214 211 214 216 212 212 207 207 201 300 297 295 292 266 271 280 279 277 53 53 53 61 62 58 57 59 58 63 62 61 61 60 58 57 55 53 98 97 100 94 90 96 93 93 90 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19
Slide 12: IFRS16 applied for the first time in 1Q19
IFRS16 applied for the first time in 1Q19 1Q18 1Q19 1Q19 PLN m YoY IAS17 IFRS16 IAS17 Revenues 1,580.4 1,827.7 15.7% 1,827.7 • Double-digit group revenue growth: Gross profit margin 45.1% 43.4% -1.7pp. 43.4% • positive LFL and floorspace increase, • on-line sales development. SG&A costs 820.5 874.0
Slide 13: IFRS16 – summary of impact
IFRS16 – summary of impact EBITDA EBIT NET INCOME Significant IFRS16 A slight impact of The impact of IFRS16 impact on EBITDA - IFRS16 on EBIT - on net profit - financial PLN 131.5m of removal of 49% of costs related to the additional depreciation rentals (PLN 140m) and asset (PLN 24.4m) and of righ
Slide 14: Trade liabilities finance inventory
Trade liabilities finance inventory INVENTORY WORKING CAPITAL (PLN m) 1,761 -PLN 197m 2,000 1,606 1,552 1,474 1,489 1,419 1,458 PLN 107m 1,600 1,600 1,381 1,277 144 177 1,200 1,639 1,200 1,475 1,590 1,587 1,490 1,482 1,403 800 1,567 1,251 800 1,403 1,296 1,370 1,370 400 400 0 0 1Q17 2Q17 3Q17 4Q17 1
Slide 15: Net cash on the balance sheet
Net cash on the balance sheet NET DEBT AND NET DEBT/ EBITDA CAPEX (PLN m, without IFRS16) (PLN m) 0.8x 1Q18: 1Q19: 500 0.0x 1.0 PLN 149m PLN 192m 0.0x -0.4x -0.3x -0.4x -0.7x -0.5x 200 -0.5x 348 -11 11 0.5 -100 -316 150.2 -221 -525 0.0 85.9 32.0 -400 -364 15.5 -0.5 13.2 19.2 21.0 57.2 -700 -594 13.2
Slide 16: 1Q19 executive summary
1Q19 executive summary 1 Positive LFL dynamics in all brands. 2 Double-digit on-line sales growth. 3 Control of costs of stores. 4 Shortening of cash cycle. 5 Financial safety – net cash. GLOBAL ASPIRATIONS 16
Slide 17: Agenda
1 . 1 Q 1 9 f i n a n cia l r e su lts 2 . K e y c o r p ora te e v e n t s 3 . 2 0 1 9 o u t lo o k GLOBAL ASPIRATIONS 17
Slide 18: Key corporate events
Key corporate events March/April 2019 May 2018 E-COMMERCE EXPANSION IN BOSNIA LOGISTICS IN SLOVAKIA AND HERZEGOVINA Renting of warehouse HOUSE – IMPROVED Opening of stores of 5 E-COMMERCE space in Slovakia for the COLLECTION LPP’s brands in Bosnia & IN CROATIA purpose of e-commerce Herzegovina – LPP
Slide 19: Success of the new House collection
Success of the new House collection The latest trends from social media and catwalks. Unobvious and interesting stylizations. S U C C ES S O F T H E N E W R E F RES HED H O U S E C OLLEC TI ON. Double-digit LFLs in each quarter starting from 2Q18. GLOBAL ASPIRATIONS 19
Slide 20: Entry to Bosnia and Herzegovina
Entry to Bosnia and Herzegovina In March and April 2019, LPP opened its FIRST STORES IN BOSNIA AND HERZEGOVINA, xx No of stores 1Q19 in Banja Luka. @ Internet stores 1Q19 1 24 @ 49@ 3 14 23 Stores are Floorspace It is the 24th located in the of all stores of market for Delta Planet LPP brands at LPP
Slide 21: Further logistics development
Further logistics development EXISTING FUTURE Stryków Pruszcz Gdański 46 ths m2 Brześć Kujawski POLAND e-commerce, rented 66 ths m2 100 ths m2 traditional stores Gdańsk traditional stores owned owned 15 ths m2 e-commerce, rented Romania Moscow Moscow 22 ths.m2 ABROAD e-commerce, rented 14 ths m2 8 t
Slide 22: Strengthening of e-commerce logistics
Strengthening of e-commerce logistics Stryków, Poland E-commerce Expansion of e-commerce warehouse logistics from 30,000 m2 to 46,400 m2 i.e. by 16 ths m2. conducted by FCs Possibility to increase floorspace to 66 ths m2. (fulfillment centres) Romania Renting of 22,000 m2 of warehouse floorspace in
Slide 23: Agenda
1 . 1 Q 1 9 f i n a n cia l r e su lts 2 . K e y c o r p ora te e v e n t s 3 . 2 0 1 9 o u t lo o k GLOBAL ASPIRATIONS 23
Slide 24: Growth acceleration in 2019
Growth acceleration in 2019 2019 Floorspace 2019 2018 former YoY (ths m2) target target • 12% YoY floorspace growth in 2019. • 2 new markets in 2019: Bosnia and Herzegovina and BY BRANDS Finland (own stores). Reserved 616.7 675.1 675.1 9% • As a result, at the end of 2019 Reserved brand stores Cropp
Slide 25: Dynamic growth in on-line sales
Dynamic growth in on-line sales 1,000+ 712.0 360.8 2019 TARGET 2018 173.1 2017 2019 target: 79.3 2016 over PLN 1bn 2015 e-commerce revenues. 64.8 ON-LINE SALES (PLN m) 2014 GLOBAL ASPIRATIONS 25
Slide 26: Profitable e-commerce growth
Profitable e-commerce growth In 2H19 we plan to launch e-stores for all countries of the European Union and in the Ukraine. Development through own e-stores provides us with a direct access to retail customer, control over inventory, price policy and stability (lack of intermediaries, continuity
Slide 27: Omnichannel is the future of retail
Omnichannel is the future of retail STORES INTERNET OMNICHANNEL We invest in modern We invest in modern logistics, increasing the We believe that the stores, inviting pace of obtaining future belongs to customers to enter purchases and in IT, omnichannel and stores them. increasing on-line support o
Slide 28: Higher maintenance capex
Higher maintenance capex Change of floorspace in 2019 (ths m2) 1,776 1,765 185 stores Capex 3,000 PLN/ m2 for new stores floorspace remains unchanged. 49 183 172 stores stores 1,227 1,091 In 2018-20 we will incur higher maintenance capex. 2018 Closing of stores Openings of stores/ 2019 modernisation
Slide 29: 2019 outlook (13 months, IFRS16)
2019 outlook (13 months, IFRS16) TARGETS • Continuation of double-digit revenue • LPP’s stores in new • Unfavourable FX trends growth due to floorspace countries. on US$, EUR and RUB development, positive LFLs and in relation to PLN. • Continuation of e-commerce. dynamic e-commerce • More severe ban
Slide 30: Q&A
Q&A GLOBAL ASPIRATIONS 30
Slide 31: Back-up
B a c k -up GLOBAL ASPIRATIONS 31
Slide 32: Network development
Network development Floorspace (ths m2) 31.03.2017 30.06.2017 30.09.2017 31.12.2017 31.03.2018 30.06.2018 30.09.2018 31.12.2018 31.03.2019 Reserved 510.7 520.8 526.8 562.3 561.0 582.2 584.9 616.7 609.7 Poland 245.9 247.4 247.9 266.8 264.9 264.7 259.3 273.3 263.3 Europe 147.7 151.3 157.6 160.8 162.2
Slide 33: 2019 network development details
2019 network development details Floorspace (ths m2) 31.12.2018 31.12.2019 Nom. growth YoY growth No. of STORES 31.12.2018 31.12.2019 Nom. growth YoY growth Reserved 616.7 675.1 58.4 9% Reserved 464 464 0 0% Poland 273.3 273.3 0.0 0% Poland 216 205 -11 -5% Europe 191.7 229.3 37.5 20% Europe 127 136
Slide 34: Changes in 1Q19 floorspace
Changes in 1Q19 floorspace CHANGE IN FLOORSPACE BY BRANDS CHANGE IN FLOORSPACE BY REGIONS (ths m2) (ths m2) -1.3 +4.3 -0.9 1,085.4 +8.0 +1.8 0.0 1,085.4 1,091.3 -7.0 +0.3 -1.2 1,091.3 -15.6 -5.9 ths m2 -5.9 ths m2 4Q18 Reserved Cropp House Mohito Sinsay Outlets 1Q19 4Q18 Poland Europe CIS ME 1Q19 •
Slide 35: 1Q19 revenue growth contributors
1Q19 revenue growth contributors REVENUE GROWTH BY BRANDS mln PLN 1Q18 1Q19 YoY +34 +17 +44 +61 -18 1,827 +86 +23 LPP GROUP 1,580.4 1,827.7 15.7% 1,580 PLN m Reserved PL 367.9 376.7 2.4% Reserved EX 359.6 436.7 21.4% Cropp PL 104.1 105.5 1.3% Cropp EX 106.1 127.8 20.4% House PL 107.1 122.2 14.1% Hou
Slide 36: Revenue and COGS split
Revenue and COGS split 1Q19 REVENUES BY REGIONS TOP5 REVENUES BY COUNTRIES IN 1Q19 (PLN m) (PLN m) ME CIS 0.4% Poland 922 23.0% Russia 322 Poland 50.5% Czech Rep. 90 Europe 26.2% Ukraine 86 1Q19 PURCHASES BY REGION Germany 68 (PLN m) Turkey 8% Far East Poland 56% 4% Poland remains our most Other 2%
Slide 37: A new breakdown of SG&A costs
A new breakdown of SG&A costs Since 2019, instead Until the end of of selling costs, we 2018 we showed have decided to Overheads consists selling costs and show costs of now of marketing The sum of SG&A general & stores, e-commerce costs, back-office, costs has not administrative and logistics which
Slide 38: Costs of stores and HQs
Costs of stores and HQs SG&A COSTS SG&A COSTS (PLN m, IFRS16 since 1Q19) (PLN m) 874 234 252 263 262 233 821 179 200 146 163 233 200 +17% YoY 596 628 620 639 636 660 641 573 581 620 +3% YoY 641 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 IAS17 1Q19 IFRS16 Costs of stores HQ & e-commerce Costs
Slide 39: 1Q19 other operating and net financial lines
1Q19 other operating and net financial lines OTHER OPERATING ACTIVITY NET FINANCIAL ACTIVITY PLN m 1Q18 1Q19 PLN m 1Q18 1Q19 OTHER OPERATING REVENUES 2.3 5.6 FINANCIAL REVENUES 17.1 12.3 Inventory excess 0.7 1.6 FX gains 16.2 8.4 Gain on sale of assets. write-ups 0.2 1.5 Interest 0.9 3.8 OTHER OPERA
Slide 40: Reasons behind rentals exclusions from IFRS16
Reasons behind rentals exclusions from IFRS16 include points expire in 2019 (short- making rentals term leases i.e. up to have only turnover are continued without a written dependent on 12 months are rates (no fixed agreement (the agreement has profitability excluded from charge) not been prolonged
Slide 41: IFRS16 impact
IFRS16 impact IFRS16 adjustments 1Q19 1Q19 IFRS16 IAS17 rentals D&A interest FX differences tax Revenues 1,827.7 1,827.7 Gross profit 793.0 793.0 % gross profit margin 43.4% 43.4% SG&A costs 874.0 140.1 -131.5 882.7 Other operating line -19.1 -19.1 EBIT -100.2 -140.1 131.5 0.0 0.0 0.0 -108.9 Net fin
Slide 42: Historical quarterly results
Historical quarterly results 1Q18 1Q19 1Q19 PLN m 2Q17 2Q18 3Q17 3Q18 4Q17 4Q18 YoY IAS17 IFRS16 IAS17 Revenues 1,705.4 2,049.7 1,812.8 2,043.9 2,148.9 2,372.7 1,580.4 1,827.7 15.7% 1,827.7 Gross profit on sales 970.9 1,224.5 888.6 1,043.4 1,247.0 1,420.6 712.8 793.0 11.2% 793.0 Gross profit margin
Slide 43: Retail sales tax
Retail sales tax Current regulations: Internet revenues are excluded from the tax. 0% tax up to PLN 17m of monthly revenues 0.8% tax from PLN17 m Based on 2018 data the tax would reach PLN 41m. to PLN 170m revenues monthly 1.4% tax from revenues If the tax starts being obligatory from 2020 above PLN
Slide 44: Cash flows
Cash flows 1Q19 CASH GENERATION 1Q19 CASH FLOWS (PLN m) (PLN m) 122 51 1,045 +232 +234 +100 992 20 -57 -59 -117 -168 -192 -143 -75 -146 -124 1Q18 IAS17 1Q19 IFRS16 Operating CF Investing CF Financing CF Total CF • Operating cash flow higher YoY due of inventory liquidation. Impact of higher D&A fr
Slide 45: Investments in the future of LPP
Investments in the future of LPP PLN m 2019 2020 2021 2022 2019-2022 Stores 680 620 500 450 2,250 Stores in Poland and abroad 680 620 500 450 2,250 Offices 110 110 70 0 290 New office Gdańsk Łąkowa - Building 1 50 50 New office Gdańsk Łąkowa - Building 2 30 40 70 New office Gdańsk Łąkowa - Building
Slide 46: Balance sheet increasingly strong
Balance sheet increasingly strong PLN m 1Q18 4Q18 1Q19 Non-current assets 2,043.8 2,417.8 5,320.5 fixed assets 1,480.1 1,818.3 1,861.9 • IFRS16 impact: change from operating leases to intangibles (incl. goodwill) 354.7 376.7 384.6 financial ones – creation of right of use assets and finance lease li
Slide 47: Reserved revenues
REVENUES (PLN m) 957 1,012 921 918 763 825 813 728 614 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 1Q19 YoY Number of stores 458 451 -7 Floorspace (ths m2) 561.0 609.7 9% Average store space (m2) 1,225 1,352 10% WOMEN, MEN 1998 AND CHILDREN YEAR OF LAUNCH AN ANCHOR BRAND WITH A BROAD CUSTOMER
Slide 48: Cropp revenues
REVENUES (PLN m) 320 334 302 287 289 254 233 189 210 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 1Q19 YoY Number of stores 377 365 -12 Floorspace (ths m2) 127.7 134.3 5% Average store space (m2) 339 368 9% TEENAGERS – BOYS 2004 AND GIRLS YEAR OF LAUNCH A STREETWEAR BRAND INSPIRED BY HIP-HOP AN
Slide 49: House revenues
REVENUES (PLN m) 290 261 237 205 223 204 159 181 170 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 1Q19 YoY Number of stores 332 320 -12 Floorspace (ths m2) 110.9 115.0 4% Average store space (m2) 334 359 8% TEENAGERS (BOYS AND 2001 GIRLS) WHO LIKE BRAVE YEAR OF LAUNCH FASHION CHOICES. OPTIMISTI
Slide 50: Mohito revenues
REVENUES (PLN m) 233 212 200 212 214 184 193 179 162 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 1Q19 YoY Number of stores 291 289 -2 Floorspace (ths m2) 103.4 108.1 5% Average store space (m2) 355 374 5% 2008 YOUNG WOMEN YEAR OF LAUNCH A BRAND THAT COMBINES COMFORT AND ELEGANCE FOR BUSINESS A
Slide 51: Sinsay revenues
REVENUES (PLN m) 236 202 209 184 186 165 149 142 112 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 1Q18 1Q19 YoY Number of stores 236 274 + 38 Floorspace (ths m2) 85.8 107.3 25% Average store space (m2) 364 392 8% TEENAGERS – GIRLS 2013 ONLY YEAR OF LAUNCH CLOTHES FOR EVERY DAY INSPIRATIONS AND ORIGI
Slide 52: Słowniczek
Słowniczek Poland Retail sales in Poland and other sales of LPP SA. CEE Region including: Czech Republic, Slovakia, Hungary. Baltic Region including: Lithuania, Latvia, Estonia. CIS Region including: Russia, Ukraine, Belarus and from 2018 also Kazakhstan. SEE Region including: Bulgaria, Romania, Cro
Slide 53: Contact
GDAŃSK HQs LPP SA Łąkowa 39/44 80-769 Gdańsk, Poland Tel. +48 58 76 96 900 Fax.+48 58 76 96 909 Email: lpp@lppsa.com DISTRIBUTION CENTRE LPP SA Tczewska 2 83-800 Pruszcz Gdański, Poland CONTACT FOR INVESTORS Email: LPP.investor.relations@lppsa.com CONTACT FOR MEDIA Email: media@lppsa.com CRACOW BRAN