Slide 1: VRG Group Investment Story
VRG GROUP INVESTMENT STORY JUNE 2022
Slide 2: Disclaimer
DISCLAIMER This presentation (the "Presentation") was prepared by VRG S.A. (the knowledge and depend on many factors due to which the actual results "Company") with a due care. Still, it may contain certain inconsistencies or achieved by the Company may differ materially from the results presented o
Slide 3: VRG Group
VISTULA BYTOM WOL(ZANKA DENICLER = WKRUK 01 VRG GROUP
Slide 4: A Diversified Retail Group
A DIVERSIFIED RETAIL GROUP 550 STORES TWO KEY SEGMENTS 52,325 m2 FLOORSPACE APPAREL 18.2% ON-LINE IN REVENUES SMART FORMAL 5 CASUAL BRANDS PREMIUM CASUAL CLOTHING PLN 884m JEWELLERY MARKET CAPITALISATION PLN 1,070m REVENUES JEWELLERY WATCHES 106 ACCESSORIES CITIES IN POLAND Data as at the end of 202
Slide 5: Presence All Over Poland
PRESENCE ALL OVER POLAND NUMBER OF STORES EOP 2021 145 114 116 29 146 550 5 | 2021 Investment Story
Slide 6: A Comprehensive Portfolio of Brands
A COMPREHENSIVE PORTFOLIO OF BRANDS BRAND formal and casual formal and casual formal and casual business and casual jewellery, watches, DESCRIPTION clothing clothing clothing clothing accessories TARGET women, men, men, women men women, men women GROUP children Brands offering formal and casual YEAR
Slide 7: SWIG20 Company with a Sizeable Free-Float
SWIG20 COMPANY WITH A SIZEABLE FREE-FLOAT SHAREHOLDER STRUCTURE VRG S.A. SHARE PRICE VERSUS sWIG80 Merger with Bytom 6 November 30, 2018 COVID-19 5 Other free- float IPOPEMA TFI 4 28.74% 23,72% 3 2 SIZEABLE 1 FREE-FLOAT PZU OFE and 0 Forum TFI DFE Jan-16 May-16 Jan-17 May-17 Jan-18 May-18 Jan-19 May
Slide 8: Key Investment Thesis
02 KEY INVESTMENT THESIS
Slide 9: Key Investment Thesis of VRG Group
KEY INVESTMENT THESIS OF VRG GROUP Optimal retail network following Growth off-line Significant A strong financial Increasingly the latest trends and on-line profitability standing sustainable improvement Group’s aim is to grow 2022 target: Double- 2022 target: Sizeably Low indebtedness, Implementat
Slide 10: Optimal Retail Network Following the Latest Trends
OPTIMAL RETAIL NETWORK FOLLOWING THE LATEST TRENDS
Slide 11: Long-Term Target: Development
LONG-TERM TARGET: DEVELOPMENT MISSION VRG mission is to creatively pursue perfection by offering its Customers high quality products and services with a special emphasis on their uniqueness The aim of the and aesthetics. Group is to build value via growth in scale of the business VISION VRG vision i
Slide 12: Group Following the Trends
GROUP FOLLOWING THE TRENDS KEY TRENDS THAT WILL INFLUENCE VRG S.A. GROUP RESULTS OFF-LINE FORMAL MENSWEAR SEPARATE FROM ON-LINE ADDING ADDING MOVE TOWARDS COLLECTIONS CASUAL/SMART FOR MEN AND OMNICHANNEL CASUAL WOMEN 12 | 2021 Investment Story
Slide 13: Potential to Develop Domestically
POTENTIAL TO DEVELOP DOMESTICALLY VRG apparel brands have W.KRUK brand constituted c. 1.8% share in apparel market in Poland c. 14% share in 2020 of jewellery market in Poland in 2020 Sources of growth of the Three branded players own apparel segment: c. 50% market share Strengthening the leading po
Slide 14: Jewellery Network as a Source of Growth in 2020-22
JEWELLERY NETWORK AS A SOURCE OF GROWTHS IN 2020-22 Number of stores by segments Both the apparel and jewellery segment were the source of growing number of stores in 2016-19. Since the end of 2018 the 590 Group consolidates the Bytom brand. 568 570 550 556 366 410 128 139 143 146 155 Closing of
Slide 15: A Favourable Mix of Own and Franchise Stores
A FAVOURABLE MIX OF OWN AND FRANCHISE STORES Number of stores by type In 2016-21 network development took place via own and franchise stores. All brands currently have both own and franchise stores. 568 590 570 556 550 410 127 146 154 150 161 Dynamic development of franchise stores (for which pe
Slide 16: New Products in Offering Support Revenues
NEW PRODUCTS IN OFFERING SUPPORT REVENUES STRONGER EMPHASIS ON WOMEN COLLECTION BALANCE BETWEEN CASUAL AND FORMAL DEVELOPMENT OF JEWELLERY AND WATCHES OFFERING The main line of the Broadening of the collection is a women's collection New W.KRUK ambassador VISTULA WOMAN tradition of classic with a ne
Slide 17: Growth Off-line and On-line
GROWTH OFF-LINE AND ON-LINE VISTULA BYTOM WOLCZANKA DENICLER =WKRUK
Slide 18: Actions Towards Omnichannel in 2022
ACTIONS TOWARDS OMNICHANNEL IN 2022 Activities focused on the customer and his/her comfort - building a close relationship with the customer, different from fast fashion. Wide New concepts of traditional possibilities stores, allowing of collecting Continuation Own e-stores to present the and return
Slide 19: Sources of Growth 2022+
GROWTH IN ON-LINE SALES SOURCES OF GROWTH 2022+ changes in ON-LINE SALES customers’ shopping AND SHARE OF ON-LINE IN GROUP REVENUES habits thoughtful selection of technologies and 24.3% CAGR 2016-21 18.2% digital solutions; = 35% aim: shopping convenience 13.6% wide possibilities of collecting and 1
Slide 20: Continuation of Rebound in Off-line Sales
CONTINUATION OF REBOUND IN OFF-LINE SALES systematic return of customers to purchases in traditional stores return to celebrations is favourable for purchasing jewellery and formal collections - customers prefer to buy more expensive collections in stores TRADITIONAL STORES ARE AN INTEGRAL PART OF O
Slide 21: Growth in Revenues of Both Segments in 2022+
GROWTH IN REVENUES OF BOTH SEGMENTS IN 2022+ Key factors affecting the Revenues (PLN m) jewellery segment: floorspace and on-line sales 1,068.3 1,069.9 development, broad offering of watches, 805.7 853.7 star collections in jewellery 688.5 375.9 offering 500.3 598.6 322.6 352.3 271.2 235.8 692
Slide 22: Significant Profitability Improvement
SIGNIFICANT PROFITABILITY IMPROVEMENT
Slide 23: Target: Further Growth in Gross Profit Margin
TARGET: FURTHER GROWTH IN GROSS PROFIT MARGIN Gross profit margin on sales Impact on 2022+ apparel segment gross profit margin: 55.0% two strong pillars of sales: casual and rebound in formal, 53.0% rational pricing policy both on-line and off-line, optimisation of inventory level. 51.0% 49.0%
Slide 24: Operating Costs Under Control
OPERATING COSTS UNDER CONTROL SG&A costs/m2 by segments (excl. IFRS16) Our goal is to keep SG&A/ m2 cost growth below sales growth in upcoming years. 759 776 801 734 631 736 • A key element of SG&A costs are costs of stores and headquarters. 1,121 1,182 1,268 1,288 1,033 1,088 • Despite significan
Slide 25: Target: Further Profitability Improvement in 2022
TARGET: FURTHER PROFITABILITY IMPROVEMENT IN 2022 EBIT (PLN M, IFRS16 since 2019) RESULTS 97.5 87.5 62.8 71.9 51.1 88.0 9.6 24.2 26.9 28.8 34.0 32.5 39.4 43.0 44.5 37.9 2022 TARGET: Sizeable YoY -49.8 results improvement. -11.9 2016 2017 2018 2019 2020 2021 apparel segment jewellery segment RISKS Ne
Slide 26: Significant YoY Improvement in 1Q22 Results
SIGNIFICANT YOY IMPROVEMENT IN 1Q22 RESULTS IFRS16 1Q21 1Q22 YoY SALES PLN 172.1m PLN 243.8m + 41.6% GROSS PROFIT MARGIN ON SALES 47.5% 50.5% + 3.1 pp. EBIT PLN (15.8)m PLN 5.0m NET PROFIT (LOSS) PLN (18.6)m PLN (2.9)m The first quarter is seasonally the weakest in the whole year. 26 | Prezentacja 1
Slide 27: 2Q22 Should Be a Seasonally Strong Quarter
2Q22 SHOULD BE A SEASONALY STRONG QUARTER 120.7 108.5 103.4 104.9 83.2 62.6 34.9 29.1 IV.20 IV.21 IV.22 V.20 V.21 V.22 VI.20 VI.21 VI.22 Assuming a very conservative scenario that revenues in June 2022 would be equal to the results for 2021, the results for 2Q22 should be strong due to growing gross
Slide 28: A Strong Financial Standing
A STRONG FINANCIAL STANDING
Slide 29: Net Cash on the Balance Sheet
NET CASH ON THE BALANCE SHEET Net debt/ (net cash) (PLN m, excl. IFRS16, incl. reverse factoring) Long-term and short-term indebtedness shown together with reverse factoring and finance leases, yet excluding the leases from 109.4 100.9 89.4 91.3 53.7 IFRS16. Finance leases under IFRS16 at PLN 332.
Slide 30: Strong Operating Cash Flows
STRONG OPERATING CASH FLOWS Working capital (PLN m) The Group conducts activities aimed at improving the working capital. 13.3 12.8 PLN 319.7m PLN 318.9m Working capital burden differs between segments: inventory turnover cycle is shorter in the apparel segment than in the 505.6 499.2 jewellery
Slide 31: Value Generation
VALUE GENERATION PLN m, excl. IFRS16 2016 2017 2018 2019 2020 2021 2022+: Focus on profitable growth of revenues and gross margin on sales. The goal EBIT 51.1 62.8 71.9 87.5 0.5 99.1 is to increase costs/ m2 below revenue/ m2 growth. Taxes 9.3 11.8 12.2 15.4 5.1 17.3 NOPAT 41.8 51.1 59.8 72.2 -4.6 8
Slide 32: Dividend Policy
DIVIDEND POLICY The Management Board of VRG has adopted a dividend policy to share the profit with shareholders in line with it In line with the • The Management Board intends to recommend annually dividend policy, the to the General Meeting payment between 20% to 70% of Management Board consolidate
Slide 33: Increasingly Sustainable
INCREASINGLY SUSTAINABLE VISTULA BYTOM WOLCZANKA DENICLE WKRUK
Slide 34: More Responsible
MORE RESPONSIBLE Responsible collections Bearing in mind environmental issues and ethics in fashion, growing awareness of the protection of animal rights and customer expectations, all the Group's brands have joined the information campaign conducted by the Open Cages Association from the Spring/ Su
Slide 35: 2020-22 CSR Strategy
2020-22 CSR STRATEGY PRODUCTS PEOPLE PLACES OUR PRODUCTS OUR EMPLOYEES OUR PLACES We want our products to be safe, eco- We want our stores to be more and more We want to provide our employees with the friendly and ethical. We promote ecological and our activities have a positive best workplace in wh
Slide 36: Glossary
GLOSSARY APPAREL SEGMENT REVENUES (PLN/M2 PER MONTH) FORMAL Revenues from brands: Vistula, Wólczanka, Bytom (from Annual revenues of segment or brand (stores and Revenues from sale of formalwear, including suits and XII 2018), Deni Cler and wholesale segment, B2B and internet)/ average working floor
Slide 37: Contact Details
CONTACT DETAILS Michał Zimnicki Executive Vice-President of the Management Board, CFO Michal.Zimnicki@vrg.pl Investor relations relacjeinwestorskie@vrg.pl