Lpp S.a. · GPW:LPP

Lpp — Q2 2015 Earnings Presentation

51 slides from Lpp's earnings presentation, Aug 20, 2015

1. Slide 1: 2Q15 Financial Results

   2Q15 FINANCIAL RESULTS GLOBAL ASPIRATIONS WARSAW, 20th AUGUST 2015 RESERVED CROPP (t)noure M0 HITI sinsay

2. 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

3. Slide 3: Agenda

   AGENDA  Executive summary  2Q15 financial results  Key corporate events  2015 outlook  Q&A 3

4. Slide 4: Over PLN2 bn revenues in 1H15

   Over PLN2 bn revenues in 1H15 1,594 +0.5% STORES LFLs PLN2,294 m 16 +16% R EVENUES S PACE m2 +8% COU NTRI ES 53% -15% PLN160 m EBIT GROSS P ROFI T SG&A / m2 > co nsensus MARGI N 4

5. Slide 5: Key 2Q15 achievements

   Key 2Q15 achievements New stores in the Prestigious location Next opening On-line store Middle East in Poznan in Germany in Czech Republic RESERVED franchise stores Stores of 5 LPP’s brands RESERVED own store Third country with Qatar, Kuwait in a new shopping mall in Wuppertal RESERVED 2,365 m2 4,50

6. Slide 6: Already 1,594 stores on 3 continents

   Already 1,594 stores on 3 continents NUMBER of STORES 30.06.2015 N U M B E R o f L P P ’s S T O R E S 26 270 LPP GROUP 1,594 19 RESERVED 429 25 Cropp 382 House 330 996 7 64 MOHITO 268 78 SiNSAY 150 50 Outlets 35 11 20 10 KUWAIT 1 15 1 1 QATAR 1 EGYPT 1 6

7. Slide 7: Agenda

   AGENDA  Executive summary  2Q15 financial results  Key corporate events  2015 outlook  Q&A 7

8. Slide 8: LFL dynamics return to positive levels

   LFL dynamics return to positive levels L F L s i n C O N S TA N T C U R R E N C I E S L F L s i n C O N S TA N T C U R R E N C I E S (data for the group) (data for the group) 20% 15.3% 14.3% 15% 13.7% 11.7% positive LFLs 10% 6.7% in May and 4.8% 5.1%4.6% June 5% 1.1% 1.5% 0% -1.7% -0.7% 0.5% -5% -2.

9. Slide 9: Growth in floorspace by regions

   Growth in floorspace by regions F L O O R S PA C E G R O W T H 2 Q 1 5 F L O O R S PA C E ths m2 by regions by regions 800 ths m2 2Q14 2Q15 YoY 8 0 2 778 780 20 LPP GROUP 672.2 778.4 15.8% 760 748 Poland 401.1 443.5 10.6% 740 EU 100.9 147.7 46.4% +30 ths m2 720 CIS 170.2 183.2 7.6% ME 0.0 3.9 N/M 70

10. Slide 10: New openings across all brands

    New openings across all brands F L O O R S PA C E G R O W T H 2 Q 1 5 F L O O R S PA C E ths m2 by brands by brands 800 ths m2 2Q14 2Q15 YoY 4 0.5 778 780 6 2.5 LPP GROUP 672.2 778.4 15.8% 12 5 RESERVED 358.9 416.3 16.0% 760 748 Cropp 102.2 111.5 9.1% 740 House 89.9 96.7 7.5% 720 +30 ths m2 MOHITO 7

11. Slide 11: Growth in group revenues

    Growth in group revenues GROUP REVENUES GROUP REVENUES PLN m by regions PLN m by brands in 2Q15 1,600 35.6% 31.7% 10.9% 40% 30.4% 19.6% 9.0% RESERVED 627 31.4% 31.3% 21.9% 25.9% 11.4% 1,200 6.1% 30% 31.0% Cropp 196 14.1% 800 20% House 160 400 10% MOHITO 146 0 0% SiNSAY 83 Other 80 Poland EU CIS Sale

12. Slide 12: Growth in floorspace lowers sales/m2

    Growth in floorspace lowers sales/m2 SALES / m2 R E TA I L S A L E S / m 2 PLN / m2 average per month 1,000 30% PLN (month) 2Q14 2Q15 YoY 632 695 721 784 755 800 697 724 20% 570 610 608 663 567 LPP GROUP 582 542 -6.9% 600 536 10% 462 Poland 630 596 -5.4% 400 0% EU 469 460 -2.0% 200 -10% CIS 553 494

13. Slide 13: E-commerce development continues

    E-commerce development continues ON-LINE SALES ON-LINE SALES PLN m PLN m 23.4 40 25 2.0% +24% 20 12.4 16.1 18.0 17.4 12.8 1.5% 30 11.5 15 6.9 6.6 1.0% 10 20 1.7 0.5% 35.4 5 28.5 0 0.0% 10 8.6 0 1H13 1H14 1H15 E-commerce revenues % of group sales  On-line sales constituted 1.4% of group revenues in

14. Slide 14: Stronger US$ increases COGS

    Stronger US$ increases COGS GROSS PROFIT MARGIN vs PLN/USD 1H15 PURCHASES PLN/USD by regions 0.35 65% Poland Other 57.9% 59.2% 61.3% 52.1% 5% 2% 0.33 60% Turkey 5% 0.31 55% 0.29 50% China Far East 52% 36% PLN/USD rate (T-2 quarters) Gross profit margin (%)  2Q15 fall in gross profit margin resulted

15. Slide 15: Lower costs of own stores

    Lower costs of own stores COSTS of OWN STORES / m2 1H15 COSTS SPLIT PLN/m2 monthly -16% YoY PLN188/m2 234 243 238 239 238 235 -15% YoY 250 224 233 220 222 220 202 189 200 61 61 69 59 63 62 66 187 56 54 57 57 Other costs 52 46 47 25% 150 53 56 57 59 61 59 58 58 56 57 56 53 50 48 100 Rental costs 50 1

16. Slide 16: Fall in SG&A costs

    Fall in SG&A costs PLN/m2 SG&A / m2 2Q15 SG&A COSTS monthly PLN m 350 -16% YoY -2% YoY 312 296 297 299 296 288 295 299 533 524 300 270 274 274 271 250 236 230 98 90 200 150 100 435 434 50 0 2Q14 2Q15 Costs of headquarters Costs of all stores  Fall in nominal levels of SG&A costs  lower costs of he

17. Slide 17: We are satisfied with 2Q15 EBIT

    We are satisfied with 2Q15 EBIT PLN m 2Q14 2Q15 YoY  Lower gross profit margin: Revenues 1,185.1 1,291.3 9.0%  weaker consumer demand and traffic  less favorable FX trends Gross profit on sales 726.2 673.4 -7.3%  EBIT on a high level: Gross profit margin 61.3% 52.1% -9.2 ppt  fall in both SG&A

18. Slide 18: 1H15 EBIT above consensus

    1H15 EBIT above consensus PLN m 1H14 1H15 YoY  Lower gross profit margin: Revenues 2,130.1 2,293.8 7.7%  weaker consumer demand and traffic  less favorable FX trends Gross profit on sales 1,263.8 1,216.8 -3.7%  EBIT on a high level: Gross profit margin 59.3% 53.0% -6.3 ppt  SG&A costs flat YoY

19. Slide 19: Inventory/m2 remain under control

    Inventory/m2 remain under control INVENTORY LOGISTICS PLN m PLN/ m2 CENTER 1,590 1,652 2,000 1,600 1,443 1,507 Trial phase of the expanded 1,600 logistics center until the end of 1,200 1,167 July 2015. 963 1,200 820 800 607 800 100% efficiency planned for 400 September 2015. 400 0 0 Doubled efficien

20. Slide 20: A stable cash cycle

    A stable cash cycle W O R K I N G C A P I TA L v s C A S H C Y C L E CASH CYCLE ELEMENTS PLN m days days 62 days 56 days 66 days 93 days 250 1,700 150 167 171 177 167 1,200 200 1 167 100 150 128 700 963 122 820 118 89 607 100 200 158 192 50 120 143 50 15 -300 13 13 12 -409 -549 -578 -644 -800 0 0 Re

21. Slide 21: Indebtedness at a safe level

    Indebtedness at a safe level C A P E X v s N E T D E B T/ E B I T D A NET DEBT (x) PLN m (x) PLN m PLN583m 250 1.2 1,050 1.0 PLN339m 0.8 194 200 172 101 160 125 750 132 0.8 0.4 150 114 117 104 450 556 0.5 87 53 102 102 100 280 46 0.4 150 202 183 50 -144 -156 0 0.0 -150 0.0 2Q14 2Q15 Short-term debt

22. Slide 22: Strong operating cash flow

    Strong operating cash flow 2 Q 1 5 C A S H F L O W G E N E R AT I O N CASH FLOW PLN m PLN m 500 300 237 231 +56 +68 400 200 +158 300 100 38 34 200 -22 156 122 -125 0 -24 100 -77 -100 -39 -94 -103 0 -200 -159 2Q14 2Q15 Operating CF Investing CF Financing CF Total CF  Operating cash flow  lower YoY

23. Slide 23: Balance sheet continues to be strong

    Balance sheet continues to be strong PLN m 30.06.2014 31.12.2014 30.06.2015  Higher YoY fixed assets due to investments in Non-current assets 1,395.0 1,516.4 1,638.4 stores. intangibles (including 311.4 315.9 321.0 goodwill)  Despite YoY growth in inventory, fixed assets 1,015.4 1,038.8 1,129.2 in

24. Slide 24: AGM decisions, 26th June 2015

    AGM decisions, 26th June 2015 DIVIDEND MERGER  AGM agreed for a cross-border merger  PLN32 per share between LPP SA and Gothals Limited.  Dividend yield of 0.5%  The target operates under Cyprus law  PLN58m (12% of 2014 group NI) and owns the rights to all LPP’s trademarks.  3 September – divi

25. Slide 25: Agenda

    AGENDA  Executive summary  2Q15 financial results  Key corporate events  2015 outlook  Q&A 25

26. Slide 26: New famous faces promote our collections

    New famous faces promote our collections Zuzanna Bijoch Margaret Face of MOHITO Designer of SiNSAY AW15/16 collection AW15/16 star collection 26

27. Slide 27: A star collection for RESERVED

    A star collection for RESERVED GM JAGGER for RESERVED Designer Georgia May Jagger # models 40 Presentation July 2015, Munich In stores September 2015 Markets all countries Fabrics used natural fabrics: silk, cashmere, leather Other projects face of RESERVED SS15 and AW14/15 collections 27

28. Slide 28: Cropp – close to its customers

    Cropp – close to its customers NEW CONCEPT OF CROPP STORES BOOMBOX KIDS BALTIC GAMES Shopping space in the form of squat, garage and industrial Collection inspired by Cooperation with CEE’s halls, adjusted to the interests of customers. Special relax dance and golden days of largest skate event. zon

29. Slide 29: New trends for Autumn-Winter 2015/16

    New trends for Autumn-Winter 2015/16 STREET LINE MODERN LINE YOUNG FASHION LAB WOMEN: MODERN UTILITY WOMEN: 1970’S LUXE WOMEN GIRLY STREET Comfortable every day clothing, for work Retro, return to the 70ies style. Golfs, Grunge and streetwear. Denim, shirts, and shopping. bell-bottomed trousers, tun

30. Slide 30: Germany – new flagships

    Germany – new flagships Germany: further development LPP’s stores 2H15 planned openings City m2 Opening Leipzig 2,040 AUG 2015  Germany – the first foothold in the Western Europe. Stuttgart 3,910 SEPT 2015  2015 marketing budget set at EUR4m, flat YoY, aimed at Ludwigsburg 2,099 SEPT 2015 increasi

31. Slide 31: Middle East – foothold on the third continent

    Middle East – foothold on the third continent Middle East: planned expansion KUWAIT LPP’s stores EGYPT QATAR SAUDI UAE Planned ARABIA openings  1Q15 marked the launch of Middle East expansion with RESERVED brand (now: 3 stores, 3 countries).  Planned openings: 3Q15 – Saudi Arabia; 1Q16 – United Ar

32. Slide 32: Agenda

    AGENDA  Executive summary  2Q15 financial results  Key corporate events  2015 outlook  Q&A 32

33. Slide 33: Floorspace growth to continue

    Floorspace growth to continue Floorspace 31.12.2014 2015 PREVIOUS 2015 YoY  +17% YoY floorspace growth planned (cut from (ths m2) TARGET CURRENT TARGET the previous +18% YoY target due to delays in new RESERVED 389.7 464.1 460.6 18% Poland 209.2 234.4 231.5 11% store openings). EU 83.9 122.6 121.7

34. Slide 34: 2015 targets

    2015 targets  Group revenue growth should exceed 10%. 2015  Gross profit margin fall should be between 4-6 ppt. TARGETS  SG&A costs/m2 should fall by c. 10% YoY. 2H15 EBIT dynamics should be better than in 1H15 due to: 2H15  planed smaller sell-offs TARGETS  higher likelihood of transferring th

35. Slide 35: Further expansion targets maintained

    Further expansion targets maintained C U R R E N T LY TA R G E T S 7 stores with floorspace of 30 own stores in Germany GERMANY 14,050 m2. in 3 years. MIDDLE 3 stores with floorspace of 30 franchise stores in the EAST 3,900 m2. Middle East in 6 years. NEW Floorspace for 8 stores New brand launch in

36. Slide 36: Open communication with investors

    Open communication with investors I N V E S TO R S ’ D AY E Q U I T Y S TO R Y D E B U T LPP’s management invites you on A new complex presentation for 15 OC TOBER 2015 investors in English available at Thursday, GDANSK www.lppsa.com 36

37. Slide 37: Agenda

    AGENDA  Executive summary  2Q15 financial results  Key corporate events  2015 outlook  Q&A 37

38. Slide 38: Back-up

    = Back-up LPP | =

39. Slide 39: An upgraded LFLs definition

    An upgraded LFLs definition A new improved LFLs definition: Former LFLs definition:  Stores that  Revenues from stores that have been in  have been the same as a year before (have operation for 12 months. not changed their floorspace, have not  Calculations were conducted without undergone upgra

40. Slide 40: Network development

    Network development Floorspace (ths m2) 30.06.2013 30.09.2013 31.12.2013 31.03.2014 30.06.2014 30.09.2014 31.12.2014 31.03.2015 30.06.2015 RESERVED 280.0 288.1 322.3 327.1 358.9 367.4 389.7 403.9 416.3 Poland 164.3 169.7 188.9 193.7 202.8 204.7 209.2 215.2 219.0 EU 47.7 48.8 52.4 52.4 64.6 69.6 83.9

41. Slide 41: Group 2Q15 revenue growth contributors

    Group 2Q15 revenue growth contributors REVENUE GROWTH REVENUES by regions by brands PLN m 61 1 1,291 PLN m 2Q14 2Q15 YoY 1,300 44 LPP GROUP 1,185.1 1,291.2 9.0% 1,200 1,185 RESERVED PL 349.8 369.7 5.7% RESERVED EX 226.2 257.2 13.7% 1,100 Cropp PL 114.5 111.4 -2.7% Cropp EX 79.6 84.3 6.0% House PL 11

42. Slide 42: Group 1H15 revenue growth contributors

    Group 1H15 revenue growth contributors REVENUE GROWTH REVENUES by regions by brands PLN m 100 2,294 PLN m 1H14 1H15 YoY 2,300 76 LPP GROUP 2,130.1 2,293.8 7.7% -12 2,200 2,130 RESERVED PL 656.4 670.5 2.2% 2,100 RESERVED EX 398.9 449.1 12.6% 2,000 Cropp PL 198.2 199.4 0.6% Cropp EX 132.1 138.7 5.0% H

43. Slide 43: RESERVED brand

     A fast fashion brand with a broad customer base; PLN m REVENUES wide range of collections. 800 676 635 627 544 576 580  Target customers: women, men and children. 600 427 505 501 479 493 371 411 393 400  Established in 1998. 200  First LPP’s brand present in Germany and the 0 Middle East. 1Q12

44. Slide 44: Cropp brand

     A casual streetwear brand. PLN m REVENUES  Target customers: teenagers (boys and girls). 300 221 220 193 199 194 196  Established in 2004. 200 139 160 170 170 136 142 111 125  Partner of many events addressed to artists and 100 street art. 0  Offers also international labels (eg. New Balance,

45. Slide 45: House brand

     Urban fashion brand with folk and vintage PLN m REVENUES elements. 300  Target customers: teenagers (boys and girls) who 200 175 200 158 165 160 like brave fashion choices. 139 133 145 127 104 114 93 111 100 80  Established in 2001 (in LPP Group since 2009). 0  Participates in multiple artistic

46. Slide 46: MOHITO brand

     A brand that combines comfort and elegance for PLN m REVENUES business and informal meetings. 200 146 146  Target customer: young women. 150 122 144 112 132 134 115 108 90 83 100  Established in 2008 (in LPP’s Group since 2009). 59 69 41 50  Anja Rubik created a limited collection for 0 AW2014/

47. Slide 47: SiNSAY brand

     Clothes for every day inspirations and original PLN m REVENUES party outfits. 100 83 77  Target customers: teenagers – girls only. 55 59 58 50  Established in 2013. 22 37 33 13  The brand stands out for original T-shirts with 2 0 extraordinary prints. 1Q15 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q1

48. Slide 48: Other operating activity and net financials in 2Q15

    Other operating activity and net financials in 2Q15 O T H E R O P E R AT I N G R E V E N U E S FINANCIAL REVENUES PLN m 2Q14 2Q15 PLN m 2Q14 2Q15 Inventory excess 2.7 2.4 FX gains 0.0 0.0 Gain on sale of assets 4.4 1.2 Interest 0.8 0.4 Other operating revenues 9.7 4.4 Financial revenues 1.0 0.6 O T

49. Slide 49: Other operating activity and net financials in 1H15

    Other operating activity and net financials in 1H15 O T H E R O P E R AT I N G R E V E N U E S FINANCIAL REVENUES PLN m 1H14 1H15 PLN m 1H14 1H15 Inventory excess 5.7 6.7 FX gains 1.4 0.0 Gain on sale of assets 9.6 2.2 Interest 0.2 1.1 Other operating revenues 19.6 10.5 Financial revenues 1.6 1.3 P

50. Slide 50: Glossary

    Glossary 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. SEE Region including: Bulgaria, Romania, Croatia. WE Region including Germany. ME Reg

51. Slide 51: Contact Information

    CONTACT INFORMATION GDANSK HEADQUARTERS CRACOW BRANCH LOGISTICS CENTRE MEDIA CONTACT INVESTOR RELATIONS CONTACT RESERVED CROPP (ih) house MOHITO sinsay

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