Lpp S.a. · GPW:LPP

Lpp — Q2 2016 Earnings Presentation

53 slides from Lpp's earnings presentation, Aug 30, 2016

  1. Slide 1: Financial Results for 2Q16

    F I N A N C I A L R E S U LT S FOR 2Q16 G L O B A L A S P I R AT I O N S W A R S A W, 3 0 t h A U G U S T 2 0 1 6

  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  2Q16 financial results  Key corporate events  2016 outlook  Q&A 3

  4. Slide 4: Almost PLN 2.7bn revenues in 1H16

    Almost PLN 2.7bn revenues in 1H16 1,686 +5.7% STORES LFLs 2,677 m PLN 18 +12.1% R EVENUES + 1 6 . 7% COU NTRI ES m2 48.2% +5.2% GROSS P ROFI T SG&A / m2 PLN 23 m EBIT MARGI N 4

  5. Slide 5: Key 2Q16 achievements

    Key 2Q16 achievements Prestigious RESERVED Two new stores Acceleration of Tallinder store store in St. Petersburg in Germany openings in Romania in Warsaw The largest RESERVED RESERVED own stores in Five new stores in The first store in the capital store in Russia. Essen and Ludwigsburg. the two sho

  6. Slide 6: Almost 1,700 stores worldwide

    Almost 1,700 stores worldwide NO. OF LPP STORES 26 280 31.03.2016 No. of stores YoY growth 19 LPP GROUP 1,686 +92 26 RESERVED 447 +18 1,028 Cropp 388 +6 15 71 House 343 +13 80 61 MOHITO 284 +16 16 26 SiNSAY 179 +29 17 Tallinder 8 +8 15 KUWAIT Outlets 37 +2 1QATAR 1 2 1 1 1 EGYPT UAE SAUDI 6 1 ARABIA

  7. Slide 7: Agenda

    AGENDA  Executive summary  2Q16 financial results  Key corporate events  2016 outlook  Q&A 7

  8. Slide 8: Continuation of positive LFLs

    Continuation of positive LFLs LFLs in LOCAL CURRENCIES 2Q16 LFLs in LOCAL (data for the group) CURRENCIES 15% 11.7% (data for the group) 10% 20% 6.7% 6.6% 19% 5.1% 4.6% 4.2% 17% 5% 2.8% 1.5% 11% 0% -0.8% -5% -2.3% -1.7% -1.5% -3.5% -10% -6.9% -3% RESERVED Cropp House MOHITO SiNSAY  LFLs were positi

  9. Slide 9: Growth in all markets

    Growth in all markets F L O O R S PA C E G R O W T H 2 Q 1 6 F L O O R S PA C E ths m2 by regions by regions 880 ths m2 2Q15 2Q16 YoY 2.2 0.0 872.7 6.4 9.0 LPP GROUP 778.4 872.7 12.1% 860 855.0 Poland 443.5 477.4 7.6% EU 147.7 190.8 29.2% 840 +17.7 ths m2 CIS 183.2 196.9 7.4% ME 3.9 7.6 94.9% 820 

  10. Slide 10: Growth in all brands

    Growth in all brands F L O O R S PA C E G R O W T H 2 Q 1 6 F L O O R S PA C E ths m2 by brands by brands 880 ths m2 2Q15 2Q16 YoY 0.8 0.0 872.7 4.3 0.9 2.6 LPP GROUP 778.4 872.7 12.1% 2.4 6.7 RESERVED 416.3 473.8 13.8% 860 855.0 Cropp 111.5 117.8 5.6% House 96.7 104.8 8.4% 840 MOHITO 89.1 95.9 7.6%

  11. Slide 11: Acceleration of revenue growth

    Acceleration of revenue growth GROUP REVENUES GROUP REVENUES PLN m by regions PLN m by brands in 2Q16 2,000 40% 31.7% RESERVED 666 + 6% r/r 30.4% 11.4% 12.1% 16.4% 1,600 10.9% 9.0% 30% Cropp 232 + 19% r/r 31.3% 19.6% 2.2% 17.2% 6.1% MOHITO 183 1,200 + 18% r/r 14.1% 25.9% 20% House 189 + 26% r/r 800

  12. Slide 12: Continuation of sales/m2 growth

    Continuation of sales/ m2 growth SALES/ m2 R E TA I L S A L E S / m 2 average per month PLN / m2 1,000 +2% YoY 10% PLN (monthly) 2Q15 2Q16 YoY 755 800 697 724 663 LPP GROUP 542 565 4.4% 610 608 631 570 536 567 535 580 0% 600 462 468 Poland 596 605 1.6% 400 -10% EU 460 494 7.6% 200 CIS 494 547 10.8%

  13. Slide 13: E-commerce continues to grow

    E-commerce continues to grow ON-LINE SALES ON-LINE SALES PLN m (PLN m) +136% YoY 68.6 50 41.2 3% +94% YoY 40 30.0 23.4 27.4 2% 30 17.4 12.4 16.1 13.9 35.4 11.5 12.8 18.0 20 28.5 6.9 6.6 1% 10 1.7 0 0% 8.5 1H13 1H14 1H15 1H16 E-commerce revenues % of group sales  On-line sales constituted 4.3% of re

  14. Slide 14: Stronger US$ increases COGS

    Stronger US$ increases COGS GROSS PROFIT MARGIN vs PLN/US$ 1H16 PURCHASES by regions PLN/USD 0.40 65% Turkey 59.2% 61.3% 52.1% 49.9% Far East 12% 60% 33% Poland 0.35 1% 55% Other 0.30 50% 3% 0.25 45% China 51% PLN/USD rate (T-2 quarters) Gross profit margin (%)  Fall in 2Q16 gross profit margin res

  15. Slide 15: Higher costs per m2

    Higher costs per m2 COSTS of OWN STORES/ m2 SG&A/ m2 +8% YoY (+5% YoY excl. Germany) +10.5% YoY 238 239 238 235 (+6.5% YoY excl. Germany) 220 222 220 202 202 296 297 299 296 59 63 62 66 189 187 186 195 191 270 274 274 271 54 57 57 52 55 46 48 236 230 232 244 237 254 46 47 48 61 59 58 58 56 57 56 53

  16. Slide 16: PLN 90m of net profit in 2Q16

    PLN 90m of net profit in 2Q16 PLN m 2Q15 2Q16 YoY  Dynamic revenue growth (positive LFLs and floorspace increase). Revenues 1,291.3 1,502.4 16.4%  QoQ slowdown in the pace of gross margin Gross profit on sales 673.4 749.7 11.3% decline, yet continuation of trends: Gross profit margin 52.1% 49.9% -

  17. Slide 17: First half results in line with estimates

    First half results in line with estimates PLN m 1H15 1H16 YoY  Dynamic revenue growth (positive LFLs and higher floorspace). Revenues 2,293.8 2,677.2 16.7%  Continuation of trends in gross profit Gross profit on sales 1,216.8 1,291.5 6.1% margin: Gross profit margin 53.0% 48.2% -4.8 p.p.  higher

  18. Slide 18: A stable cash cycle

    A stable cash cycle INVENTORY CASH CYCLE PLN m PLN/ m2 225 200 188 197 195 198 2,000 1,669 181 184 188 1,507 1,575 166 159 1,443 1,355 1,600 1,600 1,684 1,621 1,527 1,516 150 1,383 1,200 112 1,200 109 110 1,444 800 93 800 1,167 1,336 1,320 1,374 75 82 102 97 71 89 97 963 1,037 979 1,131 838 400 400

  19. Slide 19: 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 PLN m (x) PLN m (x) PLN 583m PLN 640m 250 1.6 194 1,050 1.0 1.5 200 172 1.2 0.8 132 160 104 153 150 117 125 750 102 114 101 109 89 0.8 1.0 619 100 450 556 36 50 0.4 0.5 150 183 240 0 0.0 -156 -150 -219 0.0 2Q15 2Q16 Short

  20. Slide 20: Strong operating cash flow

    Strong operating cash flow 2 Q 1 6 C A S H G E N E R AT I O N 2Q16 CASH FLOW PLN m PLN m 500 280 +115.3 231 +66.3 73 +88.9 +17.4 219.2 34 -89.4 250 145.2 -5.2 -119.4 -94 -103 -81 -125 2Q15 2Q16 0 Operating CF Investing CF Financing CF Total CF  Operating cash flow  YoY increase despite higher inve

  21. Slide 21: 1H16 executive summary

    1H16 executive summary ACHIEVEMENTS AND CHALLENGES  Strong results of MOHITO, SiNSAY, Cropp and House brands.  Intense efforts aimed at improving product, logistics and management at the RESERVED brand.  Pick-up in foreign sales.  Focus on achieving profitability in Germany (mainly on sales/ m2)

  22. Slide 22: Agenda

    AGENDA  Executive summary  2Q16 financial results  Key corporate events  2016 outlook  Q&A 22

  23. Slide 23: Tallinder – new stores of the premium brand

    Tallinder – new stores of the premium brand Tallinder in Riviera mall The first store in Warsaw SS16 collection advertised in Gdynia by Jaroslaw Bieniuk Seventh store in Poland and second Opening of the first store Investment in marketing – a well- in the Tri-City area (the first one is in Warsaw's

  24. Slide 24: Continuation of openings in Germany

    Continuation of openings in Germany Essen Ludwigsburg Munich A high-street store. Store located in a shoppping mall. A high-street store. 1,879 m2 2,450 m2 3,456 m2 Opening: April 2016 Opening: June 2016 Opening: September 2016 24

  25. Slide 25: The new concept of RESERVED stores

    The new concept of RESERVED stores  Wide, open and transparent storefront allows  Lack of dedicated zones allows for a smooth for a deep view into the store. transition between women, men and children zones.  Modern LED lamps and LED screens illuminate the collections in a better way and  Furnit

  26. Slide 26: Our trends for autumn / winter 2016/17

    Our trends for autumn / winter 2016/17 Street Fashion Modern Line Young Fashion Lab Everyday life in style Sophisticated minimalism A big city girl Everything that is simple, Moderation and elegance. Breaking Grunge returns to RESERVED. impressive and exposes the body the classics and introduction o

  27. Slide 27: We support young designers

    We support young designers FASHION STARTER – project Professional trimming of RESERVED storefronts with supporting designers the winning projects the best collections LPP’s designers and graphics Finalists created their utility models Designs of the finalists are together with academic personnel and

  28. Slide 28: Agenda

    AGENDA  Executive summary  2Q16 financial results  Key corporate events  2016 outlook  Q&A 28

  29. Slide 29: Slower floorspace growth in 2016

    Slower floorspace growth in 2016 Floorspace 2016 2016  9% YoY floorspace growth targeted for 2016 31.12.2015 previous new YoY growth (ths m2) together with 1,700 stores in 18 countries. target target  2016 targets: (1) further development BY BRANDS in Germany, (2) further floorspace growth RESERVE

  30. Slide 30: Expectations for 2016

    Expectations for 2016 2016  Revenue growth should exceed floorspace growth. TA R G E T S  Fall in gross profit margin by c.3-4% p.p. versus 2015 level.  LFLs improvement. 2016  Dynamic e-commerce development (four new brands on-line in OPPORTUNITIES five new countries in 4Q16).  New turnover ta

  31. Slide 31: Global aspirations require changes

    Global aspirations require changes 2016 and 2017: time for internal changes, mainly in the RESERVED brand  Product improvement (sizes, designs, finishing). IMPROVED  New creative director with international experience. PRODUCT  Opening of a new design department in Warsaw.  New collection delive

  32. Slide 32: Acceleration of e-commerce development

    Acceleration of e-commerce development  We accelerate the openings of on-line stores: on-line stores of four (not two) brands in 4Q16 .  Brands: House, MOHITO, Cropp and SiNSAY will have their on-line stores in five new countries: the Czech Republic, Slovakia, Hungary, Romania and Germany.  We co

  33. Slide 33: Four new markets in 2017

    Four new markets in 2017 UK K A Z A K H S TA N BELARUS Flagship in London, Five stores within opening in 4Q17. Up to three franchise 3 years, first RESERVED brand stores in two years, the opening in 4Q17. first one in 2Q17. RESERVED brand RESERVED brand SERBIA First store in Belgrade in 3Q17. RESERV

  34. Slide 34: Changes in LPP's reporting policy

    Changes in LPP’s reporting policy P R E V I O U S LY C U R R E N T LY  A rules-based catalogue as  Price sensitive information reported Current reports a basis for current reports based on management 's best catalogues publication. judgement, analysis of the past and surveys among investors and an

  35. Slide 35: Agenda

    AGENDA  Executive summary  2Q16 financial results  Key corporate events  2016 outlook  Q&A 35

  36. Slide 36: Back-up

     Back-up 36

  37. Slide 37: Network development

    Network development Floorspace (ths m2) 30.06.2014 30.09.2014 31.12.2014 31.03.2015 30.06.2015 30.09.2015 31.12.2015 31.03.2016 30.06.2016 RESERVED 358.9 367.4 389.7 402.7 416.3 435.7 461.3 467.1 473.8 Poland 202.8 204.7 209.2 215.2 219.0 223.4 232.5 230.9 235.1 EU 64.6 69.6 83.9 90.1 95.1 106.5 120

  38. Slide 38: 2016 network development details

    2016 network development details Floorspace (ths m2) 31.12.2015 2016 TARGET Nominal growth YoY growth No. of stores 31.12.2015 2016 TARGET Nominal growth YoY growth RESERVED 461.3 508.0 46.6 10% RESERVED 449 460 11 2% Poland 232.5 248.2 15.6 7% Polska 237 235 -2 -1% EU 120.2 144.1 23.9 20% EU 107 11

  39. Slide 39: Group 2Q16 revenue growth contributors

    Group 2Q16 revenue growth contributors REVENUE GROWTH REVENUES by regions by brands PLN m 1,600 1,502 +81 +47 +1 PLN m 2Q15 2Q16 YoY 1,400 +82 LPP GROUP 1,291.3 1,502.4 16.4% 1,291 RESERVED PL 369.7 353.6 -4.4% 1,200 RESERVED EX 257.2 312.8 21.6% 1,000 Cropp PL 111.4 126.1 13.2% Cropp EX 84.3 106.2

  40. Slide 40: Group 1H16 revenue growth contributors

    Group 1H16 revenue growth contributors REVENUE GROWTH REVENUES by regions by brands PLN m 2,800 2,677 +168 +75 +7 PLN m 1H15 1H16 YoY 2,600 +132 LPP GROUP 2,293.8 2,677.2 16.7% 2,294 2,400 RESERVED PL 670.5 641.7 -4.3% 2,200 RESERVED EX 449.1 562.4 25.2% Cropp PL 199.4 222.4 11.5% 2,000 Cropp EX 138

  41. Slide 41: Costs of stores and HQs

    Costs of stores and HQs SG&A COSTS SG&A COSTS PLN m PLN m 1,247 131 +20% YoY 115 119 1,036 107 120 103 250 98 103 90 92 193 493 476 521 997 435 451 455 409 434 444 843 389 1H15 1H16 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Costs of stores HQ Costs of stores HQ  Costs of stores encompass co

  42. Slide 42: Other operating activity and net financials in 2Q16

    Other operating activity and net financials in 2Q16 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 2Q15 2Q16 PLN m 2Q15 2Q16 Inventory excess (write-ups) 2.4 3.6 FX gains 0.0 8.7 Gain on sale of assets 1.2 2.9 Interest 0.4 0.2 Other operating revenues 4.4 7.2 Financial revenues

  43. Slide 43: Other operating activity and net financials in 1H16

    Other operating activity and net financials in 1H16 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 1H15 1H16 PLN m 1H15 1H16 Inventory excess (write-ups) 6.7 8.1 FX gains 0.0 10.6 Gain on sale of assets 2.2 3.7 Interest 1.1 0.4 Other operating revenues 10.5 13.7 Financial revenu

  44. Slide 44: Historical quarterly numbers

    Historical quarterly numbers PLN m 3Q14 3Q15 4Q14 4Q15 1Q15 1Q16 2Q15 2Q16 YoY Revenues 1,234.2 1,261.5 1,404.9 1,575.0 1,002.6 1,174.8 1,291.3 1,502.4 16.4% Gross profit on sales 699.6 663.2 829.1 862.8 543.6 541.8 673.4 749.7 11.3% Gross profit margin 56.7% 52.6% 59.0% 54.8% 54.2% 46.1% 52.1% 49.9

  45. Slide 45: Balance sheet remains stable

    Balance sheet remains stable PLN m 30.06.2015 31.12.2015 30.06.2016  Higher YoY fixed assets due to investments Non-current assets 1,638.4 1,797.0 1,811.7 in stores. intangibles (including 321.0 324.4 326.5 goodwill)  Growth in intangibles due to investments fixed assets 1,080.1 1,258.8 1,266.0 in

  46. Slide 46: RESERVED brand overview

     A fast fashion brand with a broad customer base; PLN m REVENUES wide range of collections. 800 754 635 676 666 627 576 580 560  Target customers: women, men and children. 600 501 544 479 493 538 393 400  Established in 1998. 200  First brand in Germany and the Middle East. 0  Advertised by int

  47. Slide 47: Cropp brand overview

     A casual streetwear brand. PLN m REVENUES  Target customers: teenagers (boys and girls). 300 221 220 234 232 217 193 199 194 196  Established in 2004. 200 170 142 167 125 136  Partner of events for artists and street art. 100  Offers also international labels (eg. New Balance, 0 Converse).  S

  48. Slide 48: House brand overview

     Urban fashion brand with folk and vintage PLN m REVENUES elements. 300 216  Target customers: teenagers (boys and girls) who 175 200 189 200 158 165 160 170 like brave fashion choices. 133 145 127 144 111 93 100  Established in 2001 (in LPP Group since 4Q08). 0  Participates in multiple artisti

  49. Slide 49: MOHITO brand overview

     A brand that combines comfort and elegance for PLN m REVENUES business and informal meetings. 200 175 183 144 146 146 151 150  Target customer: young women. 150 108 122 112 132 134 115 100 83  Established in 2008 (in LPP’s Group since 4Q08). 50  Anja Rubik created a limited collection for 0 AW2

  50. Slide 50: SiNSAY brand overview

     Clothes for every day inspirations and original PLN m REVENUES party outfits. 150 117 105  Target customers: teenagers – girls only. 100 83 83 88 77 55 59 58  Established in 2013. 50 37 33 22 13  The brand stands out for original T-shirts with 0 2 extraordinary prints. 1Q13 2Q13 3Q13 4Q13 1Q14

  51. Slide 51: Tallinder brand overview

     Fashion brand for customers who appreciate PLN m REVENUES timeless elegance, minimalism and high quality. 10  Target customer: Men and women over the age 8 6 of 30 years. 3 4  Established in 2016 years. 2 1 0 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16  SS16 collection advertised by a well-known football pla

  52. Slide 52: 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

  53. Slide 53: Contact Information

    CONTACT INFORMATION GDANSK HEADQUARTERS. KRAKOW BRANCH LOGISTICS CENTRE LPP SA LPP SA LPP SA takowa 39/44 B: Tezewska 2 80-769 Gdarisk, Poland 30-733 Krakow, Poland 83-000 Pruszcz Gdatiski, Poland 58 7696 900 Phone + 48 12 39 25 000 696 909 E-mail: Ipp@lppsa.com MEDIA CONTACT INVESTOR RELATIONS CONT

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