Lpp S.a. · GPW:LPP
Lpp — Q2 2017 Earnings Presentation
50 slides from Lpp's earnings presentation, Aug 30, 2017
Slide 1: 2Q17 Financial Results Presentation
2Q17 FINANCIAL RESULTS PRESENTATION W A R S A W , 3 0 TH A U G U S T 2 0 1 7
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 2 Q 1 7 f i n a n cia l r e su lts 2 K e y c o r po ra te e v e n t s 3 2 0 1 7 o u t lo o k GLOBAL ASPIRATIONS 3
Slide 4: Over PLN 3bn revenues in 1H17
Over PLN 3bn revenues in 1H17 1,710 STORES +5.5% LFLs 19 +15% COUNTRIES REVENUES +104% +7% E-COMMERCE m2 GLOBAL ASPIRATIONS 4
Slide 5: Over 1,700 stores
Over 1,700 stores 27 @ 301 30.06.2017 No. stores YoY 19 @ LPP GROUP 1,710 +24 28 @ Reserved 458 +11 3 Cropp 386 -2 House 338 -5 1, 013 @ 19 @ 75 Mohito 288 +4 Sinsay 204 +25 80 @ 57 @ Tallinder 0 -8 17 @ Outlets 36 -1 34 @ 18 1 12 1 3 1 1 xx Number of traditional stores @ Internet store GLOBAL ASPIR
Slide 6: LFL and e-commerce growth
LFL and e-commerce growth LFL DYNAMICS ON-LINE SALES (local currencies) (PLN m) 84.8 +106% 9.2% YoY 6.6% 6.2% +136% 4.2% 5.1% 4.6% 2.8% YoY 1.5% +8% 41.2 YoY +135% YoY 16.1 17.4 -0.8% -1.5% 6.9 2Q13 2Q14 2Q15 2Q16 2Q17 • LFLs were positive in each month in 2Q17. All brands showed positive LFLs in 2Q
Slide 7: Floorspace growths in all brands
Floorspace growths in all brands REVENUES BY BRANDS 2Q17 FLOORSPACE (PLN m) (by brands) Reserved 763 + 14% YoY ths m2 2Q16 2Q17 YoY Cropp 254 + 9% YoY LPP GROUP 872.7 933.7 7.0% Reserved 473.8 520.8 9.9% Mohito 212 + 16% YoY Cropp 117.8 121.9 3.5% House 181 - 4% YoY House 104.8 106.6 1.7% Sinsay 149
Slide 8: Growths in key regions
Growths in key regions REVENUES BY REGIONS 2Q17 FLOORSPACE (PLN m) (by regions) Poland 942 + 6% YoY ths m2 2Q16 2Q17 YoY LPP GROUP 872.7 933.7 7.0% CIS 395 + 19% YoY Poland 477.4 492.1 3.1% Europe 363 + 30% YoY Europe 190.8 216.9 13.7% CIS 196.9 216.5 10.0% ME 6 - 19% YoY ME 7.6 8.2 7.7% • Revenue g
Slide 9: Acceleration of sales/m2 growth
Acceleration of sales/ m2 growth GROUP REVENUES REVENUES/ M2 (PLN m) 6.1% 9.0% 2.2% 12.1% 17.2% 16.4% 18.0% 17.8% 16.0% 13.5% 2,000 20% PLN (monthly) 2Q16 2Q17 YoY 1,500 15% LPP GROUP (retail) 565 603 6.7% 1,000 10% Poland 605 630 4.1% 500 5% Europe 494 561 13.5% 0 0% CIS 547 589 7.6% 1Q15 2Q15 3Q15
Slide 10: Sizeable gross profit margin improvement
Sizeable gross profit margin improvement QUARTERLY GROSS PROFIT MARGIN AVERAGE QUARTERLY US$/PLN NEW INVENTORY FX LEVELS IMPORTANT FOR MANAGEMENT SETTING AW17/18 PRICES 60% POLICY 54.2% 55% 54.8% 56.5% 4.1 4.1 52.6% 49.9% 4.0 50% 52.1% 50.8% 3.9 47.1% 3.9 3.8 46.1% 45.6% 45% 3.6 40% 1Q16 2Q16 3Q16 4
Slide 11: Higher costs/m2
Higher costs/ m2 COSTS OF OWN STORES/ M2 SG&A COSTS/ M2 +5% YoY +7% YoY 258 266 271 214 211 244 254 254 186 195 191 202 205 201 236 230 232 237 189 187 48 49 53 53 53 46 47 48 55 46 50 48 52 56 57 59 63 62 47 52 93 93 90 89 93 98 99 89 98 97 Rental costs HR costs Other costs • YoY fall in rental cha
Slide 12: Doubling of net income in 2Q17
Doubling of net income in 2Q17 PLN m 2Q16 2Q17 YoY • Dynamic group revenue growth: Revenues 1,502.4 1,705.4 13.5% • positive LFLs and floorspace growth, • on-line sales increase. Gross profit margin 49.9% 56.5% 6.6 p.p. • Sizeable gross profit margin improvement, due to introduction of new inventory
Slide 13: Triple-digit earnings growth in 1H17
Triple-digit earnings growth in 1H17 PLN m 1H16 1H17 YoY • Dynamic group revenue growth due to favourable Revenues 2,677.2 3,067.7 14.6% developments in both business lines: traditional stores (positive changes in Reserved) and in e-commerce. Gross profit margin 48.2% 51.7% 3.5 p.p. • Gross profit m
Slide 14: Freeing up working capital even further
Freeing up working capital even further INVENTORY WORKING CAPITAL (PLN m) 2,000 1,516 1,684 1,621 1,634 1,604 PLN 1,669 1,381 1,600 116 265m 135 1,600 1,275 1,575 PLN 1,507 1,200 688m 1,200 1,444 1,480 1,438 1,374 1,320 800 1,336 1,251 1,167 1,131 800 1,444 1,480 1,164 1,215 400 400 756 0 0 2Q16 2Q1
Slide 15: From net debt to net cash
From net debt to net cash NET DEBT VS NET DEBT/EBITDA CAPEX (PLN m) (PLN m) 0.9x 0.8x 1.1x 0.9x 1.3x 1.0x 1.2x 0.3x 0.8x 0.0x 2Q16: 2Q17: 900 1.4 PLN 89m PLN 89m 1.2 13.2 700 1.0 11.9 10.7 13.2 500 787 0.8 715 621 640 835 11.0 583 0.6 647 99.0 300 0.4 77.5 76.0 73.7 8.6 348 0.2 51.1 100 144 27.4 0.0
Slide 16: 1H17 executive summary
1H17 executive summary 1 Continuation of strong e-commerce dynamics. 2 Stores in 19 countries – entry into Belarus. 3 Sizeable gross profit margin pick-up YoY. 4 Net working capital improvement. 5 From net debt to net cash. GLOBAL ASPIRATIONS 16
Slide 17: Agenda: Key corporate events
1 2 Q 1 7 f i n a n cia l r e su lts 2 K e y c o r po ra te e v e n t s 3 2 0 1 7 o u t lo o k GLOBAL ASPIRATIONS 17
Slide 18: Key corporate events
Key corporate events FIRST STORES E-STORES IN THE ARVATO RESERVED IN BELARUS BALTICS AGREEMENT IN BERLIN Reserved, Cropp and House Agreement with Arvato 19th store in Germany. franchise stores in Minsk On-line stores of 5 brands Flagship in prestigious to outsource e-commerce shopping mall. in Lithu
Slide 19: Outsourcing of e-commerce logistics
Outsourcing of e-commerce logistics WE AIM TO STREAMLINE E-COMMERCE OPERATIONS CO-OPERATION DETAILS WAREHOUSE DETAILS OUR BENEFITS Arvato Poland will be responsible After signing the contract, Arvato Access to e-commerce logistics for e-commerce logistics of 4 LPP increased its warehouse space by kn
Slide 20: Another Reserved flagship in Germany
Another Reserved flagship in Germany Berlin ` May 2017 Frankfurt am Main, 4Q18 • In 2Q17 Reserved Berlin flagship was opened. It is our 19th store in Germany. • Floorspace: 2 000 m2 in Open to public concept. Germany was LPP’s fourth • A prestigious location in the West Berlin Charlottenburg distric
Slide 21: Reserved debut in the centre of London
Reserved debut in the centre of London • First Reserved flagship in London, UK, since September 2017. • A prestigious venue: 252/258 Oxford Street in London, next to Zara and H&M stores. • Floorspace 3,000 m2. • Reserved e-store to be opened together with the flagship. • Kate Moss the face of Reserv
Slide 22: Agenda: 2017 outlook
1 2 Q 1 7 f i n a n cia l r e su lts 2 K e y c o r po ra te e v e n t s 3 2 0 1 7 o u t lo o k GLOBAL ASPIRATIONS 22
Slide 23: Double-digit 2017 floorspace growth
Double-digit 2017 floorspace growth Floorspace 2017 former 2017 2016 YoY (ths m2) target target • 10% YoY floorspace growth in 2017. • Reserved stores should be in 21 countries at the end BY BRANDS of 2017. 4 new countries in 2017 encompass: Reserved 509.1 578.4 565.3 11% • Serbia and the UK (own st
Slide 24: Triple-digit e-commerce revenue growth in 2017
Triple-digit e-commerce revenue growth in 2017 2020 TARGET- INTERNET SHOULD CONSTITUTE 7-8% OF GROUP SALES On-line stores of 5 brands in Russia On-line stores of 5 brands in Poland, Czech and Ukraine. Rep., Slovakia, Hungary, Romania, Germany, Lithuania, Latvia and Estonia. Reserved on-line in the U
Slide 25: First hedging transactions
First hedging transactions 1 2 3 Lowering the level of indebtedness Increase in self-financing of Hedging to minimise the level of FX of subsidiaries towards the parent subsidiaries along with their gains/losses in the net financials company (conversion of debt into improved financial standing. line
Slide 26: Logistics centre and HQs enlargement
Logistics centre and HQs enlargement 2 SOURCES OF INFRASTRUCTURE SPENDING Another logistics centre Gdansk HQs expansion We search for location for our new logistics We are constructing another building next centre. to current HQs. Current logistics centre should be sufficient The plot owned is suffi
Slide 27: 2017 outlook
2017 outlook 2017 TARGETS OPPORTUNITIES • Dynamic e-commerce development. • Revenue growth should continue • LFLs improvement. to exceed floorspace growth (positive LFLs at all brands). • Favourable US$ and EUR trends. • Pick-up in gross profit margin versus 2016 level. Estimated 2017 group gross pr
Slide 28: Investors' Day in London
Investors’ Day in London 22 September 2017, London Investors’ Day Meeting with the CEO and CFO Visit at the Oxford Street Reserved flagship GLOBAL ASPIRATIONS 28
Slide 29: Q&A
Q&A GLOBAL ASPIRATIONS 29
Slide 30: Back-up
Back-up GLOBAL ASPIRATIONS 30
Slide 31: Network development
Network development Floorspace (ths m2) 30.06.2015 30.09.2015 31.12.2015 31.03.2016 30.06.2016 30.09.2016 31.12.2016 31.03.2017 30.06.2017 Reserved 416.3 435.7 461.3 467.1 473.8 487.2 509.1 510.7 520.8 Poland 219.0 223.4 232.5 230.9 235.1 232.0 248.7 245.9 247.4 Europe 95.1 106.5 120.2 124.0 127.2 1
Slide 32: 2017 network development details
2017 network development details FLOORSPACE NUMBER OF 31.12.2016 2017 TARGET Nom. growth YoY 31.12.2016 2017 TARGET Nom. growth YoY (ths m2) STORES Reserved 509.1 565.3 56.2 11% Reserved 461 466 5 1% Poland 248.7 263.8 15.2 6% Poland 236 228 -8 -3% Europe 144.1 162.6 18.5 13% Europe 116 119 3 3% CIS
Slide 33: Changes in 2Q17 floorspace
Changes in 2Q17 floorspace CHANGE IN FLOORSPACE BY BRANDS CHANGE IN FLOORSPACE BY REGIONS (ths m2) (ths m2) 933.7 +4.1 +8.3 +0.6 933.7 +10.1 +1.9 +3.7 +1.5 +2.7 0.0 0.0 +6.8 913.9 913.9 +19.8 ths m2 +19.8 ths m2 • Reserved development in 2Q17 resulted from: (1) flagship opening in Germany, (2) openi
Slide 34: 2Q17 revenue growth contributors
2Q17 revenue growth contributors REVENUE GROWTH BY BRANDS PLN m 2Q16 2Q17 YoY -8 +29 +31 +44 -11 1,705 +96 +21 1,502 LPP GROUP 1,502.4 1,705.4 13.5% PLN m Reserved PL 353.6 374.1 5.8% Reserved EX 312.8 388.5 24.2% Cropp PL 126.1 130.9 3.8% Cropp EX 106.2 123.0 15.8% House PL 126.5 119.0 -5.9% House
Slide 35: 1H17 revenue growth contributors
1H17 revenue growth contributors REVENUE GROWTH BY BRANDS PLN m 1H16 1H17 YoY +63 +55 +71 -21 3,068 +43 +7 +173 LPP GROUP 2,677.2 3,067.7 14.6% 2,677 PLN m Reserved PL 641.7 670.0 4.4% Reserved EX 562.4 706.9 25.7% Cropp PL 222.4 224.7 1.1% Cropp EX 177.4 217.6 22.7% House PL 227.5 220.6 -3.0% House
Slide 36: Shortening production lead time
Shortening production lead time WE AIM TO DOUBLE PRODUCTION IN POLAND WITHIN THE NEXT 2 YEARS Retail market trends MADE IN POLAND Retail market trends Customers expect quicker changes within Customers want to buy local products, collections, faster fashion, answering the from their country of origin
Slide 37: Revenue and COGS split
Revenue and COGS split 1H17 REVENUES BY REGIONS TOP5 REVENUES BY COUNTRIES IN 1H17 (PLN m) (PLN m) ME CIS 1% 23% Poland 1,692 Russia 596 Poland Europe 55% 21% Czech Rep. 139 Ukraine 117 1H17 PURCHASES BY REGIONS (PLN m) Germany 115 Turkey Far East 6% 41% Poland 6% Other Poland remains our most impor
Slide 38: Costs of stores and HQs
Costs of stores and HQs SG&A COSTS SG&A COSTS (PLN m) (PLN m) 1,463 153 146 163 1,247 131 125 309 115 103 119 250 +23% YoY 103 90 537 546 573 581 +16% YoY 493 476 521 1,154 409 434 444 997 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1H16 1H17 Costs of stores HQ Costs of stores HQ • Costs of st
Slide 39: 2Q17 other operating and net financial lines
2Q17 other operating and net financial lines OTHER OPERATING ACTIVITY NET FINANCIAL ACTIVITY PLN m 2Q16 2Q17 PLN m 2Q16 2Q17 OTHER OPERATING REVENUES 7.2 20.2 FINANCIAL REVENUES 9.1 7.0 Inventory excess 3.6 2.8 FX gains 8.7 5.1 Gain on sale of assets, write-ups 2.9 14.2 Interest 0.2 1.6 OTHER OPERAT
Slide 40: 1H17 other operating and net financial lines
1H17 other operating and net financial lines OTHER OPERATING ACTIVITY NET FINANCIAL ACTIVITY PLN m 1H16 1H17 PLN m 1H16 1H17 OTHER OPERATING REVENUES 13.7 28.1 FINANCIAL REVENUES 11.3 8.7 Inventory excess 8.1 6.4 FX gains 10.6 5.4 Gain on sale of assets, write-ups 3.7 18.3 Interest 0.4 2.9 OTHER OPE
Slide 41: Historical quarterly numbers
Historical quarterly numbers PLN m 3Q15 3Q16 4Q15 4Q16 1Q16 1Q17 2Q16 2Q17 YoY Revenues 1,261.5 1,488.4 1,575.0 1,853.4 1,174.8 1,362.3 1,502.4 1,705.4 13.5% Gross profit on sales 663.2 700.6 862.8 941.7 541.8 620.6 749.7 964.4 28.6% Gross profit margin 52.6% 47.1% 54.8% 50.8% 46.1% 45.6% 49.9% 56.5
Slide 42: Cash flows
Cash flows 2Q17 CASH GENERATION 2Q17 CASH FLOWS (PLN m) (PLN m) +175 442 +74 280 435 156 +209 +12 73 -89 280 -25 -201 -81 -125 -81 -205 2Q16 2Q17 Operating CF Investing CF Financing CF Total CF • Operating cash flow more favourable YoY due to extending the payment terms for suppliers. • Investing
Slide 43: Balance sheet increasingly strong
Balance sheet increasingly strong PLN m 30.06.2016 31.12.2016 30.06.2017 Non-current assets 1,811.7 1,838.7 1,795.2 • YoY fall in fixed assets due to network optimisation fixed assets 1,266.0 1,291.3 1,248.5 in Poland. intangibles (inc. goodwill) 326.5 330.6 339.3 • Higher YoY intangibles, despite T
Slide 44: Reserved brand
REVENUES CUSTOMER Women, men and children. 828 YEAR OF LAUNCH 1998 754 763 627 666 661 614 560 538 PLN m 493 An anchor brand with a broad customer BRAND CONCEPT base and wide range of collections. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Lack of dedicated zones allows for a smooth transitio
Slide 45: Cropp brand
REVENUES CUSTOMER Teenagers – boys and girls. 269 254 YEAR OF LAUNCH 2004 217 234 232 246 196 189 167 PLN m 142 BRAND CONCEPT A casual streetwear brand. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 The shopping space is designed in the form of squat, garage and industrial halls. Stores encompas
Slide 46: House brand
Teenagers (boys and girls) who like brave REVENUES CUSTOMER fashion choices. YEAR OF LAUNCH 2001 (in LPP’s Group since 4Q08). 245 216 189 189 181 160 170 144 159 PLN m 127 Urban fashion brand with folk and vintage BRAND CONCEPT elements. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 The interior
Slide 47: Mohito brand
REVENUES CUSTOMER Young women. YEAR OF LAUNCH 2008 (in LPP’s Group since 4Q08) 211 212 175 183 192 184 PLN m A brand that combines comfort and 146 151 150 115 BRAND CONCEPT elegance for business and informal meetings. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Concept relates to elegance and
Slide 48: Sinsay brand
REVENUES CUSTOMER Teenagers – girls only. YEAR OF LAUNCH 2013 135 149 PLN m Clothes for every day inspirations and 117 120 112 105 original party outfits. The brand stands out 83 83 88 BRAND CONCEPT 58 for original T-shirts with extraordinary prints. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Slide 49: 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 and from 2017 also Belarus and Kazakhstan. SEE Region including: Bulgaria, Romania, Cr
Slide 50: Contact details
CONTACT DETAILS GDANSK HEADQUARTERS LPP SA Łąkowa 39/44 Street 80-769 Gdansk, Poland Tel. +48 58 76 96 900 Fax.+48 58 76 96 909 Email: lpp@lppsa.com CRACOW BRANCH LPP SA Bagrowa 7 Street 30-733 Cracow, Poland Tel. +48 12 39 25 000 LOGISTICS CENTRE LPP SA Tczewska 2 Street 83-800 Pruszcz Gdański, Pol