Slide 1: 3Q18 Financial Results Presentation
3Q18 FINANCIAL RESULTS PRESENTATION WARSAW, 20th NOVEMBER 2018
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: 3Q18 financial results
1 . 3 Q 1 8 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 8 a n d 2 0 1 9 o u t lo o k GLOBAL ASPIRATIONS 3
Slide 4: Dynamic e-commerce growths
Dynamic e-commerce growths 1,714 STORES +9.2% LFL 22 +16.3% COUNTRIES GROUP REVENUES +114% +10.2% E-COMMERCE m2 GLOBAL ASPIRATIONS 4
Slide 5: 22 countries on 3 continents
22 countries on 3 continents 33 @ 330@ 19 @ 30.09.2018 No. of stores YoY 23 @ LPP GROUP 1,714 + 31 8 Reserved 451 -3 1@ 940 @ Cropp 362 - 11 19 @ House 326 +2 81 @ 91 55 @ Mohito 291 +6 Sinsay 256 + 43 23 @ 1 21 35 @ Outlets 28 -6 9 18 1 1 xx Number of stores 1 3 @ Internet stores 1 GLOBAL ASPIRATIO
Slide 6: LFL and e-commerce growths
LFL and e-commerce growths LFL DYNAMICS ON-LINE SALES (local currencies) (PLN m) +101% 15.2% 12.9% 14.6% +137% YoY 150.5 YoY 9.2% 9.2% +127% YoY +9% 74.8 5.1% 6.2% YoY 4.6% 3.6% +93% YoY 31.6 12.8 13.9 6.6 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 • LFLs were positiv
Slide 7: Floorspace growths in all brands
Floorspace growths in all brands REVENUES BY BRANDS 3Q18 FLOORSPACE (PLN m) (by brands) Reserved 918 + 11% YoY ths m2 3Q17 3Q18 YoY Cropp 289 - 4% YoY LPP GROUP 939.9 1,035.4 10.2% + 16% YoY Reserved 526.8 584.9 11.0% House 237 Cropp 121.4 126.4 4.1% Mohito 193 -3% YoY House 105.6 112.4 6.4% Sinsay
Slide 8: Growths in key regions
Growths in key regions REVENUES BY REGIONS 3Q18 FLOORSPACE (PLN m) (by regions) Poland 1,044 + 4% YoY ths m2 3Q17 3Q18 YoY LPP GROUP 939.9 1,035.4 10.2% Europe 494 + 23% YoY Poland 490.5 507.2 3.4% CIS 497 + 22% YoY Europe 224.1 261.8 16.8% CIS 218.7 259.0 18.4% ME 8 + 83% YoY ME 6.6 7.3 11.1% • Rev
Slide 9: Group sales dynamics continue
Group sales dynamics continue GROUP REVENUES REVENUES/ M2 (PLN m) 2,500 18.0% 17.7% 16.0% 13.5% 21.8% 15.9% 16.0% 20.2% 12.8% 25% PLN (monthly) 3Q17 3Q18 YoY 2,000 20% LPP GROUP retail 638 618 -3.1% 1,500 15% Poland 661 634 -4.1% 1,000 10% Europe 605 588 -2.8% 500 5% CIS 625 617 -1.3% 0 0% 3Q16 4Q16
Slide 10: Gross profit margin expansion
Gross profit margin expansion QUARTERLY GROSS PROFIT MARGIN AVERAGE QUARTERLY US$/PLN 65% 4.1 FX LEVELS IMPORTANT FOR 59.7% 4.1 SETTING AW18 PRICES 60% 58.0% 56.9% 3.9 3.8 55% 50.8% 3.7 3.6 3.7 50% 51.0% 3.6 3.6 49.0% 45% 47.1% 45.6% 45.1% 3.4 40% 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 3Q16 4Q
Slide 11: Operating costs under control
Operating costs under control COSTS OF OWN STORES/ M2 SG&A COSTS/ M2 -3% YoY +5% YoY 214 211 214 216 212 212 205 201 207 280 300 279 297 295 49 53 53 53 53 61 62 58 57 254 258 266 271 57 59 63 62 61 61 60 58 57 99 89 98 97 100 94 90 96 93 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 3Q16 4Q16 1Q17 2
Slide 12: Improvement on all lines
Improvement on all lines PLN m 3Q17 3Q18 YoY • Dynamic group revenue growth: Revenues 1,812.8 2,043.9 12.8% • positive LFL and floorspace increase, • on-line sales development. Gross profit margin 49.0% 51.0% 2.0pp. • Significant increase in gross profit margin despite the sell-off period due to fav
Slide 13: Double-digit EBIT and net income growth
Double-digit EBIT and net income growth PLN m 9M17 9M18 YoY • Dynamic group revenue growth: Revenues 4,880.5 5,674.0 16.3% • positive LFLs, • floorspace growth, entry to new countries, Gross profit margin 50.8% 52.5% 1.7pp. • on-line sales increase. • Gross profit margin improvement in 9M18 due to S
Slide 14: Trade liabilities greater than inventory
Trade liabilities greater than inventory INVENTORY WORKING CAPITAL (PLN m) 1,761 2,000 1,634 1,606 1,552 - PLN190 m 1,489 1,419 1,458 PLN 221m 1,381 1,600 1,600 1,275 181 207 1,587 1,200 1,200 1,639 1,482 1,438 1,475 1,490 1,251 800 1,777 1,403 800 1,639 1,587 1,417 1,164 400 400 0 0 3Q16 4Q16 1Q17
Slide 15: Net cash on the balance sheet
Net cash on the balance sheet NET DEBT VS NET DEBT/EBITDA CAPEX (PLN m) (PLN m) 900 1.2x 1.5 3Q17: 3Q18: 0.8x PLN 120.3m PLN 209.9m 600 1.0 0.3x 348 0.0x 300 647 -11 0.0x 0.5 85.9 -0.4x 15.5 144 -0.3x -0.4x -0.5x 0 0.0 13.2 19.2 21.0 57.2 11 10.7 13.2 133.1 124.0 -300 -221 -0.5 11.0 99.0 101.1 98.7
Slide 16: 9M18 executive summary
9M18 executive summary 1 Positive dynamics in comparable stores. 2 Triple-digit e-commerce growth. 3 Control of costs of stores. 4 Decrease in inventory/ m2. 5 Increase in net cash. GLOBAL ASPIRATIONS 16
Slide 17: Agenda: Key corporate events
1 . 3 Q 1 8 f i n a n cia l r e s u lts 2 . K e y c o r p ora te e v e n t s 3 . 2 0 1 8 a n d 2 0 1 9 o u t lo o k GLOBAL ASPIRATIONS 17
Slide 18: Key corporate events
Key corporate events September 2018 September 2018 NEW COUNTRY: ANOTHER STORE SLOVENIA IN GERMANY Reserved store on the 22nd 20th Reserved store opened NEW COUNTRY: NEW RESERVED in Germany in Frankfurt am ISRAEL market in the City Center CAMPAIGN shopping mall in Celje. Main at Zeil street. Debut on
Slide 19: I Can Boogie
I Can Boogie Global #icanboogie campaign in three scenes. Reserved advertisement featured Joanna Kulig and Jeanne Damas. Joanna Kulig appeared in Reserved suit at the premiere of the Cold War film in New York. GLOBAL ASPIRATIONS 19
Slide 20: Changes in Reserved collection
Changes in Reserved collection Successfully implemented changes in the Reserved women and children collection. Currently, these are introduced to menswear part of the collection. The first effects should be visible already in the spring - summer 2019 collection. For the first time 40% of the Reserve
Slide 21: Slovenia - the fifth country in the Balkans
Slovenia - the fifth country in the Balkans Slovenia is the fifth country in the Balkans, where stores of LPP’s brands are located. We are satisfied with the so-far results of SLOVENIA CROATIA this region. 1 ROMANIA At the beginning, Reserved store was 21 35 @ opened in Slovenia. We are also plannin
Slide 22: A new e-commerce warehouse
A new e-commerce warehouse We are planning to rent a distribution center in Romania. The warehouse is to streamline the on-line operations of LPP in the SEE Region. On-line purchases of our Reserved and Mohito customers are packed in recycled packages. Floorspace: 22 ths m2 Rented Planned opening: e
Slide 23: Strengthening presence in Germany
Strengthening presence in Germany 5th largest country in terms of revenue. Development through Reserved brand stores and e-commerce. Further development only after obtaining profitability. Resignation from one store in Ludwigsburg in 3Q18. Finland will be the next Western European country after Germ
Slide 24: Kazakhstan – LPP's 23rd market launched
Kazakhstan – LPP’s 23 rd market launched Kazakhstan is the third new country opened in 2018. Reserved store with 2,385 m2 of floorspace was opened in the Dostyk Plaza shopping center in Almaty at the RUSSIA ALMATY end of October 2018. BELARUS 330 @ 8 Opening of House, Mohito and Sinsay UKRAINE store
Slide 25: Agenda: 2018 and 2019 outlook
1 . 3 Q 1 8 f i n a n cia l r e s u lts 2 . K e y c o r p ora te e v e n t s 3 . 2 0 1 8 a n d 2 0 1 9 o u t lo o k GLOBAL ASPIRATIONS 25
Slide 26: Floorspace growth to continue in 2018
Floorspace growth to continue in 2018 Floorspace 2018 former 2018 2017 YoY (ths m2) target target • 9% YoY floorspace growth in 2018. Shifts in openings of selected stores for 2019. BY BRANDS • Reserved stores are at present in 23 countries. Reserved 562.3 627.8 617.2 10% • 3 new markets in 2018: Ka
Slide 27: Dynamic e-commerce growth
Dynamic e-commerce growth E-commerce in 2018 should exceed 9% Group sales. In 1H19 we plan to launch an on-line store for all EU countries and Ukraine. 2021 e-commerce target: 20% of revenues. GLOBAL ASPIRATIONS 27
Slide 28: 2018 outlook maintained
2018 outlook maintained • Continuation of double-digit revenue • LPP’s stores in new • Unfavourable FX trends growth due to floorspace development countries. on US$, EUR and RUB and e-commerce. in relation to PLN. • Dynamic e-commerce • Group’s gross profit margin should be growths. • Ban on trade o
Slide 29: Floorspace growth acceleration in 2019
Floorspace growth acceleration in 2019 Floorspace 2018 target 2019 target YoY (ths m2) • 10% YoY floorspace growth in 2019. • Planned entry into 2 new markets with own stores: BY BRANDS Bosnia and Herzegovina and Finland. Reserved 617.2 673.9 9% • As a result, at the end of 2019 Reserved stores shou
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) 30.09.2016 31.12.2016 31.03.2017 30.06.2017 30.09.2017 31.12.2017 31.03.2018 30.06.2018 30.09.2018 Reserved 487.2 509.1 510.7 520.8 526.8 562.3 561.0 582.2 584.9 Poland 232.0 248.7 245.9 247.4 247.9 266.8 264.9 264.7 259.3 Europe 140.0 144.1 147.7 151.3 157.6
Slide 33: 2018 network development details
2018 network development details Floorspace (ths m2) 31.12.2017 31.12.2018 Nom. growth YoY growth No. of STORES 31.12.2017 31.12.2018 Nom. growth YoY growth Reserved 562.3 617.2 54.9 10% Reserved 468 464 -4 -1% Poland 266.8 273.1 6.3 2% Poland 232 216 -16 -7% Europe 160.8 192.4 31.7 20% Europe 119 1
Slide 34: Capex planned for 2018-20
Capex planned for 2018-20 PLN m 2018 2019 2020 2018-2020 Stores 320 380 350 1,050 Poland and abroad stores 320 380 350 1,050 Office 135 100 140 375 New office Gdańsk Łąkowa - Building 1 60 20 80 New office Gdańsk Łąkowa - Building 2 70 70 New office Gdańsk Łąkowa - Building 3 70 70 New office Gdańsk
Slide 35: Changes in 3Q18 floorspace
Changes in 3Q18 floorspace CHANGE IN FLOORSPACE BY BRANDS CHANGE IN FLOORSPACE BY REGIONS (ths m2) (ths m2) +2.8 -3.7 -0.7 +0.7 +1.8 +0.2 1,035.4 +4.3 +0.7 1,035.4 1,034,2 1,034.2 -10.8 +6.9 +1.2 ths m2 +1.2 ths m2 2Q18 Reserved Cropp House Mohito Sinsay Outlets 3Q18 • 3Q18 was marked by optimizatio
Slide 36: 3Q18 revenue growth contributors
3Q18 revenue growth contributors REVENUE GROWTH BY BRANDS PLN m 3Q17 3Q18 YoY +32 -7 +44 +76 +6 2,044 +92 -13 LPP GROUP 1,812.8 2,043.9 12.8% 1,813 PLN m Reserved PL 400.6 427.6 6.7% Reserved EX 424.7 490.2 15.3% Cropp PL 158.4 135.5 -14.4% Cropp EX 143.2 153.5 7.2% House PL 133.3 146.1 9.6% House E
Slide 37: 9M18 revenue growth contributors
9M18 revenue growth contributors REVENUE GROWTH BY BRANDS PLN m 9M17 9M18 YoY +85 -28 +127 +245 -43 5,674 +365 +42 LPP GROUP 4,880.5 5,674.0 16.3% 4,881 PLN m Reserved PL 1,070.6 1,242.7 16.1% Reserved EX 1,131.6 1,324.1 17.0% Cropp PL 383.1 373.8 -2.4% Cropp EX 360.9 411.9 14.1% House PL 353.9 392.
Slide 38: Revenue and COGS split
Revenue and COGS split 9M18 REVENUES BY REGIONS TOP5 REVENUES BY COUNTRIES IN 9M18 (PLN m) (PLN m) ME CIS 0.3% Poland 3,004 22.7% Russia 1,034 Poland 52.9% Europe Czech Rep. 281 24.0% Ukraine 242 9M18 PURCHASES BY REGIONS Germany 194 (PLN m) Far East Turkey 40% 5% Poland 2% Poland remains our most O
Slide 39: Costs of stores and HQs
Costs of stores and HQs SG&A COSTS SG&A COSTS (PLN m) (PLN m) 252 263 2,611 234 200 153 146 163 179 2,238 125 715 488 +47% YoY 573 581 596 628 620 639 636 537 546 1,895 1,750 +8% YoY 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 9M17 9M18 Costs of stores HQ & e-commerce Costs of stores HQ & e-commerc
Slide 40: 3Q18 other operating and net financial lines
3Q18 other operating and net financial lines OTHER OPERATING ACTIVITY NET FINANCIAL ACTIVITY PLN m 3Q17 3Q18 PLN m 3Q17 3Q18 OTHER OPERATING REVENUES 5.1 7.0 FINANCIAL REVENUES 13.5 -1.5 Compensations, inventory excess 4.1 4.3 FX gains 12.3 -4.5 Gain on sale of assets, write-ups -0.3 0.8 Interest 1.
Slide 41: 9M18 other operating and net financial lines
9M18 other operating and net financial lines OTHER OPERATING ACTIVITY NET FINANCIAL ACTIVITY PLN m 9M17 9M18 PLN m 9M17 9M18 OTHER OPERATING REVENUES 16.9 20.9 FINANCIAL REVENUES 22.1 5.3 Compensations, inventory excess 10.5 15.0 FX gains 17.8 0.0 Gain on sale of assets, write-ups 1.7 0,8 Interest 4
Slide 42: Historical quarterly numbers
Historical quarterly numbers PLN m 4Q16 4Q17 1Q17 1Q18 2Q17 2Q18 3Q17 3Q18 YoY Revenues 1,853.4 2,148.9 1,362.3 1,580.4 1,705.4 2,049.7 1,812.8 2,043.9 12.8% Gross profit on sales 941.7 1,246.3 620.6 712.8 970.9 1,224.5 888.6 1,043.4 17.4% Gross profit margin 50.8% 58.0% 45.6% 45.1% 56.9% 59.7% 49.0
Slide 43: Cash flows
Cash flows 3Q18 CASH GENERATION 3Q18 CASH FLOWS (PLN m) (PLN m) +225 430 +88 +47 851 651 +110 209 129 -12 -210 -48 -28 -106 -204 -180 -192 3Q17 3Q18 Operating CF Investing CF Financing CF Total CF • Operating cash flow further release of working capital by extending the repayment of liabilities. •
Slide 44: Balance sheet increasingly strong
Balance sheet increasingly strong PLN m 30.09.2017 31.12.2017 30.09.2018 Non-current assets 1,952.1 2,041.4 2,238.1 • YoY growth in fixed assets due to network fixed assets 1,397.5 1,478.2 1,648.3 development and investments in logistics. • Higher YoY intangibles, due to investments in concept intan
Slide 45: Reserved brand
REVENUES CUSTOMER Women, men and children. (PLN m) 957 921 918 YEAR OF LAUNCH 1998 828 825 763 728 661 614 An anchor brand with a broad customer base BRAND CONCEPT and wide range of collections. 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Lack of dedicated zones allows for a smooth transition betwe
Slide 46: Cropp brand
REVENUES CUSTOMER Teenagers – boys and girls. (PLN m) YEAR OF LAUNCH 2004 302 320 269 287 289 246 254 189 210 BRAND CONCEPT A casual streetwear brand. 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 The shopping space is designed in the form of squat, garage and industrial halls. Stores encompass speci
Slide 47: House brand
Teenagers (boys and girls) who like brave REVENUES CUSTOMER (PLN m) fashion choices. YEAR OF LAUNCH 2001 (in LPP’s Group since 4Q08). 245 261 223 237 189 205 181 170 159 Urban fashion brand with folk and vintage BRAND CONCEPT elements. 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 The interior of the
Slide 48: Mohito brand
REVENUES CUSTOMER Young women. (PLN m) YEAR OF LAUNCH 2008 (in LPP’s Group since 4Q08) 233 211 212 200 212 192 184 193 162 A brand that combines comfort and elegance BRAND CONCEPT for business and informal meetings. 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Concept relates to elegance and beauty.
Slide 49: Sinsay brand
REVENUES CUSTOMER Teenagers – girls only. (PLN m) YEAR OF LAUNCH 2013 202 209 184 165 135 149 142 Clothes for every day inspirations and 120 112 BRAND CONCEPT original party outfits. The brand stands out for original T-shirts with extraordinary prints. 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Fr
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, Belarus and from 2018 also Kazakhstan. SEE Region including: Bulgaria, Romania, Croat
Slide 51: Contact details
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